What Are Pre-Foreclosure Homes & How to Find Them

Pre-foreclosure homes represent a distinct segment within the real estate market, signaling a property where the homeowner has fallen behind on mortgage payments. This stage occurs before the lender fully repossesses the property through a completed foreclosure process. It indicates a specific phase in a property’s distressed lifecycle.

Understanding Pre-Foreclosure

Pre-foreclosure signifies the period after a homeowner has defaulted on their mortgage, but before the lender has completed formal foreclosure proceedings. During this phase, the homeowner legally retains ownership. The lender initiates this stage by issuing a Notice of Default (NOD) or a similar legal document, formally notifying the borrower of missed payments and the intent to pursue foreclosure if the default is not resolved.

This status differs from a Real Estate Owned (REO) property, which is a home the lender has already repossessed through a completed foreclosure auction. A short sale, often occurring during the pre-foreclosure period, is when the lender agrees to allow the property to be sold for less than the outstanding mortgage balance. The pre-foreclosure period serves as an opportunity for the homeowner to address the delinquency and potentially avoid losing their home.

The Pre-Foreclosure Timeline

Pre-foreclosure typically begins when a homeowner misses several mortgage payments, often three to six consecutive months. Lenders usually attempt to contact the borrower during this initial delinquency period to discuss repayment options. If payments remain unmade, the lender proceeds with formal legal steps.

The primary legal action marking the start of pre-foreclosure is the issuance of a Notice of Default (NOD) or, in some jurisdictions, a Lis Pendens. This notice formally informs the homeowner of their default and specifies a period, often 90 to 120 days, to cure it by making up missed payments, including any accumulated fees and interest. If the default is not resolved within this designated cure period, the lender may then proceed to file a Notice of Trustee Sale or similar document, indicating the property will be sold at a public auction. The specific timeline and legal requirements vary depending on whether the state follows a judicial foreclosure process or a non-judicial process.

Locating Pre-Foreclosure Properties

Identifying properties in the pre-foreclosure stage involves accessing public records where legal notices are filed. One common method is to visit the local county recorder’s office or equivalent government agency, which maintains records of Notices of Default (NOD) or Lis Pendens filings. These public records usually provide the property address, homeowner’s name, and details about the outstanding debt.

Several online real estate platforms and specialized services compile pre-foreclosure listings. Websites like Zillow, Realtor.com, and Trulia often feature sections dedicated to distressed properties, allowing users to filter for pre-foreclosures. Paid services such as Foreclosure.com or RealtyTrac specialize in providing comprehensive, regularly updated databases of pre-foreclosure properties, sometimes including contact details. Engaging a local real estate agent specializing in distressed properties can also provide access to such listings, including those not widely publicized.

Key Considerations for Transactions

For potential buyers, engaging with pre-foreclosure properties requires thorough due diligence. Conduct a comprehensive title search to identify any other liens on the property, such as tax liens or second mortgages, which could become the buyer’s responsibility after purchase. A professional property inspection is also recommended, as these homes may have deferred maintenance or damage due to the homeowner’s financial distress.

One common resolution in the pre-foreclosure stage is a “short sale,” where the homeowner sells the property for less than the outstanding mortgage balance with lender approval. Buyers interested in a short sale should be prepared for a potentially longer transaction timeline, as lender approval can take several weeks or months. For homeowners facing pre-foreclosure, several options exist to avoid foreclosure. Loan modification programs can alter the terms of the mortgage, such as reducing the interest rate or extending the loan term, to make payments more manageable.

Alternatively, a short sale allows the homeowner to sell the property and mitigate the impact on their credit, often with the lender forgiving any remaining debt after the sale. A deed in lieu of foreclosure is another option, where the homeowner voluntarily transfers the property deed to the lender to satisfy the mortgage debt, which can be less damaging to credit than a full foreclosure. Refinancing the mortgage, while challenging once payments are missed, might also be a possibility if the homeowner can secure a new loan to pay off the existing one. Seeking guidance from a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD) or a real estate attorney can provide homeowners with tailored advice on these options.