What Exactly Does it Mean to Buy a Foreclosure Property?

A foreclosure property is a piece of property a mortgage lender sells to cover off a defaulted mortgage loan. Every foreclosure culminates in a public auction in which the lender sells the property and anybody can buy the property. Or you could buy a foreclosure property from a bank after the lender purchases the property in the auction.


Foreclosure is the legal process which happens when a debtor defaults on a mortgage loan. Lenders foreclose on land to fulfill the outstanding balance on the mortgage loan. By way of instance, if you borrow money from the lender to buy your house, the lender will require you to register either a mortgage or a trust deed giving the lender the right to foreclose if you don’t timely pay off the loan.

Sheriff’s Sale

There are two types of foreclosure procedures in California. Under a standard mortgage document that the lender will file a foreclosure lawsuit in a California state court, and the judge will order the sheriff’s department to sell the mortgaged property. This is called a sheriff’s sale since the sheriff conducts the auction.

Trustee’s Sale

More prevalent than a sheriff’s sale in California, however, is a trustee’s sale. A trustee’s sale happens under a trust deed. A trust deed is comparable to a mortgage except a trust deed allows the lender to foreclose without even filing a lawsuit or perhaps involving a judge or sheriff at all. Instead, a trustee appointed by the lender will advertise public notice of the foreclosure auction and then the trustee administers the auction. The trustee sells the land to the maximum bidder in the auction.

Time Frame

There are two ways to buy a foreclosure property. First, you can bid in the sheriff’s sale or trustee’s sale and if you are the high bidder then the property is yours. More commonly, however, lenders and banks buy the property in the sale, fix up the property a bit, and then pay off the property. This second kind of foreclosure land is commonly known as banked-owned possessions or REOs (real estate owned).


The probability of buying a foreclosure property is the defaulting borrower has the right to”redeem” the mortgage for up to one year after the foreclosure auction. This means that in case the debtor comes up with all the money to pay back the complete mortgage balance plus costs incurred in the foreclosure process then the borrower may take the property back, even if somebody else bought the property in the auction. In California at least, all foreclosure land includes a threat that the land might get removed within one year after the auction.

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