What are Preforeclosures?

A preforeclosure is an action that takes place where public notice is given before the start of a foreclosure sale on a property. This process occurs to give those who might be interested in purchasing the property an opportunity to get their finances together before the auction occurs. To learn more about how this action works, let’s take a closer look at the preforeclosure.

Why it Happens

The reason that the preforeclosure occurs is because the homeowner has defaulted on his or her loan. As a result of this action, the lending company has sent out a Notice of Default (NOD) letting the homeowner know that payment arrangements must be made immediately in order to avoid losing the home.


If the homeowner doesn’t pay, or make some arrangements with the lending company to make his or her mortgage payments, the company will often times send out a public notice to let potential buyers know the a foreclosure sale may be pending. This is the buyer’s opportunity to get in and begin negotiating before the home ends up on the auction block.

What Happens Next

If you think that you would like to get in on the action before the homeowner makes a decision on what they want to do with the home, it’s good to contact him or her to negotiate a price early. This way, you may be able to take advantage of a short sell (where the owner sells the house at a price that’s less than what they owe) in order to get the property out of their hands. People who take advantage of a preforeclosure would rather take this route than wait for an auction where they have to bid.

If you do decide to purchase a home before the foreclosure sale – especially if it is a short sale – keep in mind that you may be responsible for all loans and liens owed on the property after purchasing. The more you know about preforeclosure and the properties you’d like to buy in this process, the more smoothly each transaction will flow.