Foreclosure Glossary

The 70% rule is a widely-used formula for calculating the maximum purchase price for a fix and flip investment property....

An acceleration clause is a provision in a mortgage or deed of trust that allows the lender to demand immediate full pay...

After Repair Value (ARV) is the estimated market value of a property after all planned renovations and repairs are compl...

An assignment contract is a legal document that transfers a buyer's rights and obligations under a purchase agreement to...

A foreclosure auction (also called trustee sale or sheriff sale) is a public sale where a foreclosed property is sold to...

In a deed of trust arrangement, the beneficiary is the lender or current holder of the promissory note who benefits from...

The BRRRR Method (Buy, Rehab, Rent, Refinance, Repeat) is a real estate investment strategy designed to build a rental p...

Chain of title is the historical sequence of ownership transfers for a specific property, from the original owner to the...

A chain of title gap occurs when there is a break or missing link in the recorded ownership history of a property, creat...

Clear to Close (CTC) is a lender's final approval indicating that all underwriting conditions have been satisfied and th...

A cloud on title is any document, claim, unreleased lien, or encumbrance that might invalidate or impair the owner's tit...

A credit bid is a bid placed at a foreclosure auction by the foreclosing lender using the debt owed to them as payment r...

A deed in lieu of foreclosure is a transaction where a borrower voluntarily transfers property ownership to the lender t...

A deed of reconveyance is a document that transfers legal title back to the borrower (trustor) from the trustee after a...

A deed of trust is a security instrument used in some states instead of a mortgage that involves three parties: the borr...

Default occurs when a borrower fails to meet the legal obligations of their loan agreement, most commonly by not making...

A deficiency judgment is a court order holding the borrower personally liable for the difference between the foreclosure...

Delinquency refers to being behind or overdue on mortgage payments. A loan is typically considered delinquent after miss...

A double close (also called simultaneous close, back-to-back close, or same-day close) is a real estate transaction stru...

The due diligence period is a contractually specified timeframe during which a buyer can investigate a property's condit...

An Earnest Money Deposit (EMD), also called a good faith deposit, is money submitted with a purchase offer to demonstrat...

An encumbrance is any claim, lien, charge, or liability attached to real property that may diminish its value or restric...

Equity is the difference between a property's current market value and the total amount owed against it, representing th...

Escrow is a financial arrangement where a neutral third party (escrow agent, title company, or attorney) holds funds, do...

Fix and flip is a real estate investment strategy where an investor purchases a property below market value, renovates i...

Forbearance is a temporary agreement where the lender allows the borrower to reduce or suspend mortgage payments for a s...

A hard money loan is a short-term, asset-based loan primarily secured by the property value rather than the borrower's c...

An HOA lien (Homeowners Association lien) is a legal claim placed on a property when the owner fails to pay required HOA...

An IRS lien (also called a federal tax lien) is a legal claim by the Internal Revenue Service against a taxpayer's prope...

A judgment lien is a court-ordered claim against a debtor's property that results from a lawsuit. When a creditor wins a...

Judicial foreclosure is a foreclosure process that requires the lender to file a lawsuit and obtain a court judgment bef...

A lien is a legal claim against a property that serves as security for a debt or obligation. The lienholder has the righ...

Lis Pendens, Latin for "lawsuit pending," is a formal notice recorded against a property indicating that litigation affe...

Lis Pendens, Latin for "litigation pending," is a formal notice recorded in the county land records alerting the public...

A loan modification is a permanent change to the original mortgage terms, typically to make payments more affordable for...

Loan to Value (LTV) is the ratio of a loan amount to the appraised value or purchase price of a property, expressed as a...

Maximum Allowable Offer (MAO) is the highest price an investor should pay for a property to achieve their desired profit...

A mechanics lien (also called a construction lien, contractor's lien, or materialman's lien) is a security interest in r...

A mortgage is a legal instrument that pledges real property as security for a loan, creating a lien on the property that...

Non-judicial foreclosure is a foreclosure process that does not require court involvement, proceeding instead through a...

A Notice of Default (NOD) is a formal public notice filed by a lender when a borrower has fallen significantly behind on...

A Notice of Sale is a general term for the public announcement that a property will be sold at foreclosure auction. Depe...

A Notice of Trustee Sale (NOTS) is a public notice announcing that a property will be sold at auction to satisfy an unpa...

Pre-foreclosure is the period between when a Notice of Default is filed and the property is sold at foreclosure auction....

Proof of Funds (POF) is documentation demonstrating that a buyer has sufficient liquid capital to complete a real estate...

A quiet title action is a lawsuit filed to establish clear ownership of real property and eliminate any clouds on title...

A redemption period is a legally mandated timeframe after a foreclosure sale during which the former homeowner (or somet...

Reinstatement is the process of curing a mortgage default by paying all past-due amounts, including principal, interest,...

REO (Real Estate Owned) refers to properties that have been acquired by a lender, typically a bank, after an unsuccessfu...

The right of redemption is a legal right allowing a borrower to reclaim their property after foreclosure by paying the f...

A satisfaction of mortgage (also called a mortgage discharge, release of mortgage, or mortgage satisfaction piece) is a...

A short sale occurs when a homeowner sells their property for less than the total amount owed on the mortgage, with the...

Subject-to (also written "subject to" or "sub-to") is a creative real estate acquisition strategy where the buyer takes...

Surplus funds (also called excess proceeds or overbid funds) are the amounts remaining after a foreclosure sale when the...

A tax deed is a legal document that grants property ownership to a government entity or successful bidder when a propert...

A tax lien is a legal claim placed on a property by a government entity when the owner fails to pay property taxes, inco...

Title refers to the legal right to own, use, and dispose of property, as well as the documentary evidence of that owners...

A title search is an examination of public records to determine the legal ownership of a property and identify any liens...

A trustee in real estate is a neutral third party who holds legal title to property under a deed of trust arrangement un...

Wholesale real estate is an investment strategy where an investor (the wholesaler) contracts to purchase a property at a...