While a downturned economy is hard on many homeowners, it can open the doors to your new home at a greatly reduced price if you search for foreclosures. A home listed as a pre-foreclosure is not yet back in the bank's hands, and it may be a good time to negotiate a deal if you're looking to buy. If you found a listing for the house of your dreams but then noticed the listing disappeared, it's likely the listing is inactive. This can happen for a variety of reasons.
Before the bank forecloses on a home, the homeowner must default on the loan. This doesn't normally happen after one missed payment; the homeowner is usually late by several months. The bank must give the homeowner a chance to "cure" the loan, or make it current. In some states, the banks have the right to demand the full balance of the loan to cure it. More commonly, the banks ask for the full amount of the missed payments to get the loan back on track. If the homeowners can't cure the loan, the bank starts foreclosure proceedings and puts the house in pre-foreclosure status.
Not all homes in pre-foreclosure are listed as short sales, but a short sale is one way to get a good price on the home. This happens during the pre-foreclosure process, often while the homeowner is still living in the house. The bank agrees to consider selling the house for less than the balance of the mortgage as a way to get it off the bank's books without ending up in foreclosure. The bank account manager, however, can change his mind at any time and remove the listing, rendering it inactive.
The pre-foreclosure listing can become inactive if the real estate company in charge of selling it changes. For example, the homeowner may have listed the house for sale at full price before becoming late on payments. Once the bank approves the possibility of a short sale, that real estate agent may no longer want to sell the house. Short sales often are long, complicated processes while you wait for the bank's approval, and many real estate agents don't want to deal with the hassle. Also, the bank might require the homeowner to use a certain real estate agent to list the short-sale home. When a listing is between agents, it's inactive.
The homeowner still has a chance -- right up until the time that the house is sold at auction -- to cure the loan. In some states, the homeowner can get his home back even after the auction date has passed. Even if you've bid on a pre-foreclosure home, it can become inactive if the homeowner pays the past due amount of the loan. In that case, the foreclosure process stops, as does the possibility of your deal.
Based outside Atlanta, Ga., Shala Munroe has been writing and copy editing since 1995. Beginning her career at newspapers such as the "Marietta Daily Journal" and the "Atlanta Business Chronicle," she most recently worked in communications and management for several nonprofit organizations before purchasing a flower shop in 2006. She earned a BA in communications from Jacksonville State University.