Phases of Foreclosure

Many people don’t realize the various phases of foreclosure that a property can be in. What phase it is currently  can have a huge impact on the purchase and process. Before you begin the process of selling or purchasing a foreclosure property, be sure to educate yourself on the various phases of foreclosures so that the process can run smoothly and you can ensure that you achieve the result you are looking for. 


In a pre-foreclosure stage, the process has begun, but there is no guarantee that the home will become available for sale. The process starts when the homeowner is more than 90 days late on payments. In most cases, when the home is in this stage, the owners are not ready to move or sell, and the transaction process will require a significant amount of patience on the buyer’s side as the homeowner attempts to get their funds in order. 

Short Sale

Short sale is another early stage of the process, but unlike pre-foreclosure, in a short sale, the homeowner intends to sell, but does not have the necessary funds or resources to close the transaction. Because of this, a short sale will need approval from the lenders. 

Deed in Lieu of Foreclosure

In the event the property cannot be sold in a short sale, either because the owner is not able to get a high enough offer or the bank will not allow the short sale for other reasons, there is a process call a “deed in lieu of foreclosure” in which the owner can simply deed the property back to the bank in exchange for a waiver of the debt. This is an alternative to the short sale which typically results in the same outcome to the homeowner. 

Auction Sale

If the owner is unable to complete a short sale or deed in lieu of foreclosure, the property will be foreclosed and offered up in an auction. When the process reaches this stage, potential buyers can place bids for the property, and the person willing to offer the highest bid will move forward with purchase. This bidding structure can take a couple of hours, and the sale will most likely need to be a full cash payment. In Illinois, homeowners can often delay these auctions to get more time to complete a short sale or deed in lieu of foreclosure, so just because a sale date has been set does not mean it is too late to save the property. 

Real Estate Owned

In some cases, a property will be owned by a lender typically after a foreclosure auction is unsuccessful or the planned sale falls through. In this case, the bank or lender will be the owner of the home, and they will likely proceed with any necessary repairs, taxes, and evictions. 

In these cases, the lender will typically price the home competitively as there is no pressing need to off-load the home.  

Government Owned

In a government-owned foreclosure, the federal, state, or local government will own the assets and will be the recipients of the sale profits. A variety of properties and assets may fall into this umbrella, as the government can acquire land and assets through typical purchase. A government-owned foreclosure will not look much different than any other foreclosure, except for the fact that Government owned assets are exempt from being taxed. 

If you are looking for an expert to help guide you through the purchase process of a foreclosed home to help ensure that you get the fairest possible deal, contact Gurney Law Group for a Real Estate attorney in Chicago today. Our Chicago real estate attorneys have years of experience with all stages of foreclosure, and are prepared to fight for you. 

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