The foreclosure process contains three stages: foreclosure auction; bank-owned properties, called real estate owned (REO); and pre-foreclosure.
The foreclosure auction is literally that: People show up at a predetermined time, usually in a public location, and bid against each other on a property. Anyone can come, and often representatives from the financial institution that was owed money by the owner in default will attend to make sure bidding begins at an amount that will ensure they recover their costs. At foreclosure auctions, the highest bid wins.
If a home isn't sold at auction, it may become REO. These are homes that have gone through an unsuccessful foreclosure auction. With insufficient bids, these homes become bank-owned properties. We'll look at pre-foreclosure next.