Unlike a short sale, foreclosures are initiated only by lenders. Mortgagors who fall behind on their payments—anywhere from three to six months—may be subject to foreclosure by their lenders unless they bring their loans up to date. Foreclosure proceedings vary by state including what types of notifications the lender must provide, as well as what options the homeowner has to bring the loan up to date. Laws also stipulate how long a bank has to sell the property.
The lender initially takes legal action to take control of the property to force the sale of the home. By doing so, the lender moves against delinquent borrowers, hoping to make good on its initial investment of the mortgage. Also, unlike most short sales, many foreclosures take place when the homeowner has abandoned the home. If the occupants have not yet left the home, they are evicted by the lender in the foreclosure process.
Once the lender has access to the home, it orders its own appraisal and proceeds with the sale of the home. Foreclosures do not normally take as long to complete as a short sale, because the lender is concerned with liquidating the asset quickly. Foreclosed homes may also be auctioned off at trustee sales, where buyers bid on homes in a public process.