Real Estate Glossary > F > Foreclosed Home Definition

A foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank has begun the process of repossessing the home. These homes are usually not for sale until the entire foreclosure process Foreclosure is a process that transfers the right of home ownership from the homeowner to the bank or lender. A home goes into foreclosure when the owner stops paying his mortgage loan payments. is complete and the bank lists the home in the local Multiple Listing Service (MLS.) A local or regional service that compiles available real estate for sale by member brokers along with detailed information brokers and agents can access online. A foreclosed home goes through a few stages:

1. Pre-foreclosure: the bank filed a notice of default A note from a lender indicating that the borrower has fallen two months behind on his payments. saying that the owner has fallen two months behind on the mortgage payments. At this point, the owner still has two to three months to try and refinance The process of paying off one loan to get another with a better interest rate and terms. the loan or attempt to sell the home as a short sale. A home for sale whose owner owes more on the mortgage than the home is worth. Homeowners hope to sell their home as a short sale to avoid penalties associated with going into foreclosure.
2. Auction: the owners can't make the mortgage payments and the bank schedules an auction to sell the home "as-is" (meaning what you see is what you get) to the highest bidder. If the owner comes up with money at the last minute to begin making the mortgage payments, the bank will cancel the auction.
3. Bank Owned: the home failed to sell at an auction, and the lien holders Any legal claim of ownership listed on the title of the home. of the home are paid off through private mortgage insurance This insurance protects the mortgage lender against loss if a borrower defaults their loan. Borrowers with a down-payment less than 20% are required to purchase mortgage insurance. or end up taking a loss on the investment. These homes are also known as REOs (real estate owned). Short for "real estate owned," REOs are foreclosed homes owned by banks and lenders. The bank with the primary mortgage on the home is now the owner and will usually list the home with a real estate agent in the local MLS.

Foreclosed homes may or may not be for sale. Foreclosed homes with a purple icon on the map mean that we received information about this home from a bank's website, but it's most likely not for sale.

MLS-listed foreclosures have reached their final resting place in the bank's hands and are listed in the local MLS by a real estate agent. An individual licensed in his or her state that helps people buy and sell homes. These homes are for sale and Redfin agents are happy to tour and write offers on these homes.