The first stage is the Pre-foreclosure stage or Lis- pendens. During this stage the Bank gives the homeowner formal notice that they intend to start foreclosure proceedings. The Bank also tells the homeowner when the auction will be held.
The second stage is the actual auction. The Bank attempts to sell the property for enough money to cover all the debt the homeowner owes the lender. If the sell price does not cover all the dept owed by the homeowner to the lender, then the property is purchased by the lender and becomes an REO.
The third stage of foreclosure is the post auction or REO stage. Homes that are not sold at auction become the property of the lender. (Real Estate Owned by the lender.) At this stage the lender owns the property they foreclosed on. Lenders are not in the business of owning, managing or investing in real estate. Therefore at this stage they are highly motivated to sell these properties as quickly as possible.
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