02/14/2026
DIFFERENCE BETWEEN SHORT SALE, FORECLOSURE, PRE-FORECLOSURE, AND AUCTION PROPERTIES
Short Sales and REOs are typically listed with a Realtor, have low risk for purchasing and can get a mortgage.
Short Sale (may or may not be in pre-foreclosure) – the owner owes more than the property’s current market value and does not have the funds or equity to close the transaction. They must have the banks approval to accept less than what is currently owed. Realtor works with the seller’s agent and the seller’s agent is then dealing with the bank.
Pre-Foreclosure – because the owner is greater than 90 days late on payments, the lender has started the foreclosure process by hiring a “trustee” to send a notice of trustee sale and schedule the property for auction at the courthouse.
In pre-foreclosure often the owner really does not want to sell and move, is in denial. You need patience and due diligence to purchase.
Foreclosure - Bank Owned (REO not a Short Sale) – for many investors this is the way to go. The foreclosure process has completed and property went unsold during the courthouse auction, so the property was returned to lender. Realtor deals directly with the bank’s Realtor
During Foreclosure, a “trustee” steps in and the property is scheduled for auction at the courthouse.
Auction Properties – the borrower did not correct the arrears of their default and the bank’s trustee stepped in to schedule the property to be auctioned off to the highest bidder. Oftentimes, the highest bidder is the lender.
Auctions have maximum risk, you need all cash and if you buy you get all liens, IRS liens and possibly other mortgages tied to the property. Due diligence is really needed here.