Breaking Down the Different Types of Foreclosures

Breaking Down the Different Types of Foreclosures
By the Iuliucci Team at KW Default Solutions

Not all foreclosures are created equal. Depending on the state and the terms of the mortgage, there are several different ways a foreclosure can unfold. Whether you're a homeowner trying to understand your options or an investor looking for opportunities, it’s important to know how each type works.

 
🏛️ Judicial Foreclosure
This is the traditional court-based foreclosure process. It begins when a lender files a lawsuit against a borrower who's fallen behind on payments. The court reviews the case, and if it rules in favor of the lender, the property is then scheduled for a foreclosure sale.

Key takeaway: Judicial foreclosures can drag on for months—sometimes even years. While the process is slower, it provides more transparency. If you're an investor, you may have a chance to bid on these homes at a public auction once the court finalizes the sale.

 
📑 Nonjudicial Foreclosure (Power of Sale)
In states that allow it, lenders can skip the courtroom entirely—so long as they follow specific procedures outlined in state law and the loan documents. Instead of going through court, a third-party trustee manages the process.

Borrowers receive a formal notice and time to bring their loan current. If they don’t, the property can be sold at auction by the trustee.

Key takeaway: This process is usually much faster than judicial foreclosure. Investors often find opportunities at trustee sales in states that allow this method.

 
🚫 Strict Foreclosure
This less common type of foreclosure doesn’t involve a sale at all. In states that permit it, the lender files a lawsuit, and if the borrower can’t pay within a deadline set by the court, the lender takes full ownership of the home—no auction needed.

Key takeaway: Strict foreclosures usually happen when the mortgage balance exceeds the value of the home. These are rare and mostly seen in states with older foreclosure laws.

 
⏳ Preforeclosure
This is the stage before a property officially goes into foreclosure. Typically, this happens after a borrower has missed three or more payments, triggering a Notice of Default from the lender.

During this window, homeowners still have options—including short sales, loan modifications, or reinstatement. For real estate investors, preforeclosures offer a chance to work directly with homeowners and lenders before the property hits auction, often resulting in more favorable terms.

Key takeaway: This is where creativity and negotiation matter most. It’s also where experienced agents can make a real difference for both distressed homeowners and savvy buyers.

 
At KW Default Solutions, we specialize in guiding clients through every phase of the foreclosure process—whether you’re looking to sell before it’s too late, buy at auction, or identify off-market preforeclosure deals. We offer the experience, connections, and systems to help you make smart moves in any market.

📞 Call or text us today at (949) 630-0650

🌐 Visit https://REOcalifornia.com 

 
Sources:

National Association of Realtors
Investopedia
RealtyTrac
HUD.gov

Want help navigating preforeclosures, REOs, or trustee sales in your area? Reach out—we’d love to help.