A pre-foreclosure sale is when a homeowner attempts to sell his or her home during a pre-foreclosure period to prevent being foreclosed upon. A pre-foreclosure period is when a mortgage payer has failed to make a payment on his or her mortgage for a period of time, typically 90 days, and when the bank has filed a default notice on the property.
An example of a pre-foreclosure sale would be a home owner selling his or her home after he or she has defaulted on mortgage payments for three months. If the home owner can sell the home in time, he or she can prevent foreclosure, and repay the bank with the funds generated from the sale. However, if the home is not sold fast enough, then the bank can seize the property. Defaulting on mortgage payments can have substantial consequences.