Close this search box.

Table of Contents



Pre-foreclosure refers to the stage when a property owner has defaulted on mortgage payments and the lender has initiated the legal process to repossess the property, but the foreclosure sale has not yet taken place. This period gives the owner a chance to pay off the outstanding amount or sell the property before it goes into foreclosure. The length of the pre-foreclosure process varies according to laws, but it typically lasts 90 to 120 days.


The phonetic spelling of “Pre-Foreclosure” is: pree – fohr – kloh – zhur.

Key Takeaways

  1. Definition: Pre-Foreclosure refers to the initial stage of the foreclosure process, specifically when a homeowner is 90 days into defaulting on their mortgage payments. During this period, the lender will issue a notice of default and the homeowner gets a grace period (pre-foreclosure period) to pay off the debt or sell the property.
  2. Opportunity for Buyers: Pre-foreclosure is often a unique opportunity for buyers seeking investment opportunities or affordable homeownership. These properties are typically priced below market value because the homeowners aim to sell the house ASAP to avoid foreclosure. Hence, it may provide potential for higher returns.
  3. Last Chance for Homeowners: For homeowners, pre-foreclosure offers a last chance to avert foreclosure by either selling the property or restructuring their mortgage payments. The measures they take could mean the difference between preserving their credit score or facing bankruptcy.


Pre-Foreclosure is an important term in business and finance as it refers to the period when a homeowner has defaulted on their mortgage payments, but the lender has not yet taken possession of the property or sold it off. During this stage, both the lender and homeowner have the opportunity to resolve the situation or mitigate losses. The homeowner can pay off the defaulted amount, negotiate a modified payment plan, or sell the property in a short sale. Meanwhile, lenders may opt for pre-foreclosure because it’s often less costly and time-consuming than a full-on foreclosure process. Therefore, understanding pre-foreclosure can be crucial for homeowners, buyers, and lenders alike, as it provides potential avenues to prevent foreclosure, reduce financial losses, and explore investment opportunities.


Pre-foreclosure is a stage within the foreclosure process that financial institutions utilize as a way to mitigate financial losses from non-performing loans. This phase typically commences when a property owner has missed several mortgage payments and has been unable to resolve their delinquency status, often due to financial hardship. From the lender’s perspective, the primary purpose of pre-foreclosure is to regain the money borrowed, if the homeowner continually fails to fulfil their mortgage obligations. Instead of immediately resorting to foreclosure, pre-foreclosure serves as a grace period where measures can be taken to help homeowners catch up on their missed payments, thereby averting the drastic consequences of a full-blown foreclosure.From a real estate investor’s or potential home buyer’s standpoint, pre-foreclosure offers a prime opportunity to purchase properties below market value. Properties in pre-foreclosure are often sold through short sales, where the lender agrees to sell the property for less than the owed mortgage balance. By doing so, the bank can recover part of the loan amount swiftly without having to take the property to an auction, while the delinquent homeowner can avoid the damaging credit impacts of a foreclosure. Therefore, the purpose of pre-foreclosure is twofold: it helps lenders recoup some of the loan loss in a timely manner and allows potential investors to acquire properties at relatively lower prices.


1. John’s House: John had been struggling with his finances due to a job loss. Although he had been consistently paying his mortgage for several years, due to his financial difficulties, he stopped making payments, resulting in a delinquency. His lender issued a notice of default after the unpaid bill had accumulated for months, starting the pre-foreclosure process.2. Emily’s Commercial Property: Emily owns a commercial property that she rented out to a business. When the business failed and stopped paying rent, Emily was left with a mortgage that she couldn’t pay. After failing to make the monthly mortgage payments for several months, the lender initiated the pre-foreclosure proceedings. 3. The Jackson Family: The Jackson family had a steady income and owned their house for a decade. However, a sudden medical emergency resulted in large medical bills that the family could not handle. Eventually, they fell behind on their mortgage payments. The lender initiated the pre-foreclosure process after several missed payments. This gave the family a chance to sell the house themselves at a lower price before the bank repossessed the home.

Frequently Asked Questions(FAQ)

What is a Pre-Foreclosure?

Pre-foreclosure is a period that starts when the homeowner receives a default notice, indicating that he has missed at least one payment on his mortgage, and ends if the homeowner can catch up on his payments and get the mortgage out of default, or when the property is sold in a foreclosure auction.

How can I find Pre-Foreclosure properties?

You can find pre-foreclosure properties in a few different ways. Some options include websites that specialize in foreclosed property listings, local court or county property records, and local real estate agents who specialize in distressed properties.

What happens during the Pre-Foreclosure period?

During the pre-foreclosure period, the homeowner has an opportunity to pay off the outstanding mortgage debt to prevent the foreclosure. In some cases, they may choose to sell the home, work on a loan modification with the lender, or let the home go into foreclosure.

How long does the Pre-Foreclosure process usually last?

The length of the pre-foreclosure process can vary, but it typically lasts for several months. The duration depends on the homeowner’s ability to satisfy the debt or the speed at which the lender processes the foreclosure.

Can Pre-Foreclosure properties be purchased?

Yes, pre-foreclosure properties can be purchased directly from the homeowner before the bank forecloses on the property. This may require negotiation with both the homeowner and the lender.

What are the advantages of buying a Pre-Foreclosure property?

Purchasing a pre-foreclosure property can offer advantages such as discounted prices, less competition from other buyers, potential for negotiations, and an accelerated selling process since the homeowner would want to avoid a foreclosure on their credit report.

Are there any risks involved in buying a Pre-Foreclosure home?

Yes, there are potential risks associated with buying a pre-foreclosure home. These can include condition issues with the property, potential for eviction proceedings of current occupants, unexpected liens on the property, and the homeowner’s right of redemption, which could allow them to reclaim the property after sale.

What is a Pre-Foreclosure sale or Short Sale?

A pre-foreclosure sale, also known as a short sale, is when the bank agrees to let the homeowner sell the property for less than what they owe on their mortgage. The homeowner has to prove they are facing financial hardship, and the bank has to agree that it’s their best option for recouping some of the money they’re owed.

Related Finance Terms

  • Delinquency: This term refers to the failure to meet the agreed-upon terms of the mortgage loan, usually involving not making mortgage payments on time.
  • Mortgage Default: This occurs when a borrower fails to make their mortgage payments, leading to the possible start of the pre-foreclosure process.
  • Notice of Default (NOD): This is a formal notification sent by the lender to the borrower after a certain number of missed payments, usually marking the beginning of the pre-foreclosure stage.
  • Short Sale: This is an option during pre-foreclosure where the borrower sells their home for less than owed on the mortgage. The lender may agree to this to avoid the costs of foreclosure.
  • Loan Modification: This is a change made to the terms of an existing loan by a lender as a result of a borrower’s long-term inability to repay the loan. This can sometimes help a borrower avoid pre-foreclosure.

Sources for More Information

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More