1. Pre-foreclosure - Typically after the lis pendens or notice of default has been filed. The buyer can approach the owner and offer to buy the property outright before the foreclosure sale. If the proceeds are enough to pay off the mortgage, the owner can walk away and avoid a foreclosure on their record. There may even be equity they can capture. More common these days, though, the seller will have no equity and often will owe more than the home is worth. This is where you’re most likely to see a short-sale situation. The owner may agree to sell the home, but the lender must agree to accept an amount short of what they are owed.

2. Public Auction - This is the official court ordered sale of the property. The property is auctioned at the courthouse, sometimes literally on the courthouse steps. The highest bidder walks away with the property after the loan balance is paid off. If there isn’t sufficient equity in the property, often it is the lender who is the high bidder at the auction. Occasionally, there will be equity in the property and buyers can find deals at public auctions. This is not recommended for the novice buyer, though. Large amounts are required for deposit on these auctions and there is usually little opportunity to inspect the property. Other liens, such as IRS tax liens, may encumber the property as well.

3. Bank Owned (REO) - The lender takes ownership of the property at the public auction or through an agreement with the borrower (deed in lieu of foreclosure). The lender will in almost all cases resell the property by listing it with a real estate agent. This is by far the easiest way to obtain a foreclosure property. The properties are usually priced very aggressively because the lender doesn’t want the expense and liability of owning the property. Many of these properties may need maintenance and repair but will be priced accordingly.