Foreclosure terminology is among the most confusing for MA home buyers. A question commonly asked is what the difference is between pre-foreclosure, foreclosure, and post-foreclosure. Here’s a quick overview of their key differences.

Pre-foreclosure Homes

Pre-foreclosure is also commonly referred to as a short sale. Basically, the homeowners want to sell the property, but the amount for which they will sell is not enough to pay off their mortgage. These homeowners may also be behind on their payments. In order to sell, the mortgage lender must agree to accept less money than they are owed. The homeowner is still the seller, but the mortgage company must approve the sale.

Foreclosure Sales

If a homeowner defaults on their mortgage, the lender will eventually start foreclosure proceedings. Part of that process involves a foreclosure auction. Buyers can bid on a property, site unseen. There is no opportunity to view the interior or inspect anything before completing the purchase. If the property is still be occupied, the buyer would be responsible for evicting those occupants. This is obviously a risky purchase, typically reserved for experienced cash investors.

Post-Foreclosure Homes

In most cases, a property does not sell at auction. The mortgage company will complete the foreclosure proceedings, evict any occupants, and take possession of the property. The homes are eventually marketed for sale by the lender. Thus, these are often referred to as bank owned properties. In this case, the bank (mortgage lender) is the seller.

Pre-foreclosure versus Post-foreclosure, Which Is Better?

The typical MA home buyer would not participate in a foreclosure auction because it’s too risky. Additionally, standard mortgages can not be used for the purchase. However, mortgage products can normally be used to purchase a pre-foreclosure or post-foreclosure home. It can take a long time to get approval for a pre-foreclosure sale, so they generally work better for buyers with flexible timeframes. Purchasing post-foreclosure is very similar to purchasing from a private homeowner, except for the fact that you are dealing with a lender instead of a private owner. Additional paperwork may therefore be involved.

If you’re considering pre-foreclosure and post-foreclosure properties, it is important to hire an attorney to help review legal paperwork and protect your interests. Contact us today for assistance!