There are three distinct stages in the foreclosure process in relation to acquiring property:

  1. The period before the trustee auction, known as pre-foreclosure
  2. The auction itself
  3. The period after the auction, for properties that are bought by the lender, known as REO bank-owned properties

1) Lender Files Notice of Default (N.O.D.)
Start of foreclosure process. Initial notice recorded after borrower fails to meet the terms of their loan. CC 2924c.(a)(1).  “Preforeclosure” begins with filing of Notice of Default (N.O.D.). Properties are considered to be in Preforeclosure from the filing of the initial Notice of Default until the property is sold at auction. During this period investors can purchase the home directly from the owner, Realtors can list the home, and Lenders can help them refinance.

2) Auction Date Set
Sets auction date. Can be recorded 3 months after Notice of Default
CC 2924 c. (b)(1). Initial auction date can be just 20 days after Notice of Trustees Sale is recorded. CC 2924 f. (b)(1). Auctions can postpone for up to one year. CC 2924 g. (c)(1). Auction properties have had a Notice of Trustee Sale filed setting an auction date, and have not yet been sold or cancelled. Investors can purchase the home at auction; and Realtors® and Lenders can monitor their client’s properties, to ensure their listing and loan activities are completed before the auction.

3) “Court House Steps” Auction
Transfers property to winning bidder. By default this will be the lender if no bid higher than the lender’s opening bid is received. CC 2924 h. (c).

4) “REOs” – When a Property DOES NOT SELL AT AUCTION 

Bank owned properties received no bid at auction, resulting in the bank taking ownership. These properties are commonly referred to by the banks as REO’s (Real Estate Owned). Investors can purchase these properties directly from the bank; and Realtors® can solicit the listing, since banks will almost certainly market the property for sale.


Opportunity Traditional Financing Subject-To Financing Title Insurance Inspections Eviction Required Overall Risk
Preforeclosure Yes Yes Yes Yes No Low
Auction No No No No Maybe High
Bank Owned Yes No Yes Yes No Very Low