Foreclosures Definitions

No matter what your situation, knowing definitions of foreclosures will provide you with a strong negotiating tool. These are a few of the more commonly used terms:

Judicial Foreclosure

This is a legal action taken by the lender against the homeowner. In order for the mortgage company to take control over the property, they use the court system to start the foreclosure process. The judicial foreclosure is different from state to state but the normal process is that a home goes up for foreclosure sale, it is auctioned off to the highest bidder, and then either the sale is complete or the homeowner exercises their redemption period to save their home.


A default constitutes when a homeowner fails to make their regular monthly mortgage payments. Typically, a loan would be considered in default after three to four months of non-payment.

Trustee Sale

This is when the lender sells a home in default. Almost all Deed of Trusts have a "power of sale" clause, which gives the trustee a right to a trustee sale. Again, this varies from state to state but typically, the home is advertised in a local or county paper providing the time, date, and location of the auction.

Condition of Title

The lender of a home is the senior lien holder and sometimes their goal is to sell the property to regain their losses. However, there are other instances when the lender is not interested in taking back the property. The condition of title allows you to determine how many liens are on the foreclosed property and what money is due and to whom.


If you have decided to purchase a foreclosed home, be sure to do as much in-depth research as possible. Although you might not be able to inspect the home, find out as much about the property as possible to save yourself from making a big mistake.

Keep in mind when bidding on a foreclosed home, any unrealistic bids will not even be considered. Work with some local banks to determine what an appropriate bid is, what kind of down payment you should expect, the current interest rate, and as much general information as you can.