Understanding the Three Types of Foreclosures

Three types of foreclosures foreclosure notice paper

Understanding the three types of foreclosures can help investors determine when to purchase a foreclosed property.

Buying and selling properties at or near foreclosure is never a happy process. However, it is possible that a foreclosure than be a mutually beneficial transaction for a willing investor and a distressed homeowner. Shrewd investors looking for a real estate deal from foreclosure should be aware of the three different types of foreclosures and what it means for purchasing the property. Read on for an introduction to each of these types of foreclosures and what they indicate. 


In this stage, investors can do the most good for the homeowner and themselves. This type of foreclosure is where further damage to the homeowner’s credit rating can be stalled, and the home can be transferred at an agreed-upon price before the lender needs to be involved. Investors can find properties in this stage from attorneys, accountants, real estate agents, or business associates. 

Foreclosure Stage

Investors can find properties in foreclosure from the County Clerk’s office or a title insurance company. This process will vary from state to state, and either be a judicial or non-judicial foreclosure. 

Judicial Foreclosures

These foreclosures pertain to mortgages, rather than deeds of trusts, and take a significantly longer time to complete.

Non-Judicial Foreclosures

These types of foreclosures pertain to deeds of trust where a trustee handles the process in about two to four months after a borrower has defaulted and stopped making payments. Once property passes through either of these types of foreclosures, it is ready to be sold at auction. 


In this last foreclosure stage, the lender has already taken control of the property. The home is possessed by the lender’s Real Estate Owned (REO) department, or in the hands of a new owner or investor who had purchased it at auction. 

Investors can refer to the foreclosure notice to find the name of the lender and the balance owed on the mortgage. Lenders are often willing sellers because they do not want an REO on the books. If the property ends up with a private investor, a potential buyer may be able to make an offer on their own or with the help of a real estate agent, but the price is variable. 

Entering the Foreclosure Market

If you are a person looking to become a long-term investor of distressed properties, you should know each of these types of foreclosures and become an expert in that process. That will help you locate the properties you are looking to purchase and understand how to do so.

A Title Company You Can Trust: Colony Title

At Colony Title, we will help you through the process of getting your property’s title and help you avoid the pitfalls of hidden costs while you buy your home. We are also well trained in identifying any and all errors in public records and helping you resolve them. We specialize in real estate title insurance in both Maryland and Washington, D.C., and we will perform an expert title search, check through all past documentation, and examine records for any fraud or forgery. For more information on how we can get you into the home of your dreams, contact us online or give us a call at (410) 884-1160. To get more updates on housing markets and how to get into your home, follow us on Facebook, Twitter, LinkedIn, and Google+.

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