What Does it Mean to Purchase a Foreclosure Property?

A foreclosure property is a piece of real estate that a mortgage lender sells to pay off a defaulted mortgage loan. Every foreclosure culminates in a public auction where the lender sells the property and anybody can purchase the property. Or you can purchase a foreclosure property from a bank after the bank purchases the property at the auction.

There are two ways to purchase a foreclosure property. First, you can bid at the sheriff's sale or trustee's sale and if you are the high bidder then the property is yours. More commonly, though, banks and lenders purchase the property at the sale, fix the property up a bit, and then resell the property. This second type of foreclosure property is commonly referred to as banked-owned properties or REOs (real estate owned).