Foreclosure or Pre-Foreclosure, What’s the difference?
Zillow has recently been listing some houses as Pre-Foreclosures. Often, these houses are not for sale at all but are still listed by Zillow stating that they are for auction. I have been fielding calls on one especially in the Palmer area that is in a very attractive area. Zillow has taken the descriptive language from a two year old listing when it was for sale as if it is current information including the statement that the appliances are included. I question the ethics of that practice but that is not the purpose of the post. This post is to explain the difference between a “pre-foreclosure” and a foreclosure.
I tend to put this term in brackets because it is not a very good description of the situation. These are houses owned by people who recently received a notice of default. A notice of default is recorded and informs the owner that they are at least 30 days late on a payment and if they do not bring their account current the will face further legal action. If the owner does nothing the mortgage holder will eventually put the house up for auction at the court house steps. However, most owners do bring their accounts current so the house never does go up for auction.
It’s important to realize that the only people who are authorized to sell the home at this point are the current owners of the house. Usually they are still living in their house and are planning to bring the account current. This is private property and you are trespassing if you enter their property without their permission.
If the owners do not bring the account current the mortgage holder will eventually auction it on the courthouse steps. This auction will be attended by a representative of the mortgage holder who will bid the amount owed to them. This amount will include the total principle balance of the loan, back payments, back interest and any legal fees that they have incurred. Normally this amount is more than the house is worth so the mortgage owner takes ownership at the end of the auction.
After the lender takes ownership of the house it has officially become a foreclosure. The lender has foreclosed on the house and now owns it. They will sell it…eventually. It usually takes several months to several years before the lender finally lists the property for sale. There are many different lenders and they all have different practices but the big ones, HUD, VA, etc generally operate similarly. They first get an asset manager to secure the property and winterize it. Then they usually have it “trashed out”. They get it appraised and finally list it with a local Realtor. All of those listings can be found at our foreclosure page, http://www.matsuhomes.com/foreclosures-3/.
They are then sold like any other house. I wrote a lot more way about how that process works. See those links below:
If you would like to see any of these foreclosure just give a call. We took a video of the one on Williwaw today and I’m showing the one on First Street in Palmer in one hour.