Occurs when a lender pursues its lien on a property. Foreclosure action generally begins after 90 days of nonpayment. Parties are able to bid on the property as part of the foreclosure sale. The title will be transferred to the successful bidder, subject to any applicable redemption period.
The term "bank owned" most often refers to homes that have been repossessed during the foreclosure process and did not sell to another party at the foreclosure auction. Bank owned homes are also often referred to as REO homes which stands for "Real Estate Owned".
Occurs when the seller at the contemplated price will not have sufficient proceeds to pay off their mortgage. In order for the transaction to be completed, the bank either has to "forgive" the debt or allow the seller to turn the deficit into a personal loan to be paid off after the home has been sold.