• The borrower/owner can reinstate the loan by paying off the default amount during a grace period determined by state law. The grace period is known as pre-foreclosure.
• The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan thus avoiding a foreclosure on their credit history.
• A third party purchases the property at a public auction at the end of the pre-foreclosure period.
• The lender takes ownership of the property, the intent here is to re-sell it on the open market. The lender can take ownership through an agreement with the borrower/owner during the pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed/taken back by the lender are also known as bank owned or as an REO - Real Estate Owned -  owned by the lender.

Deed in lieu of foreclosure is voluntary instrument in which the borrower conveys all interest in the real property to the lender to satisfy a loan that is in default, thus avoiding foreclosure proceedings. Deed in lieu of foreclosure has many advantages to both the borrower and lender. The largest advantage to the borrower is that it immediately releases them from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public exposure of the foreclosure proceeding. An additional benefit to the borrower is that it has less effect on their credit than a foreclosure would. The advantages to the lender: reduction in the time and cost of repossession, lower risk of borrower revenge damaging the property, additional advantages should the borrower subsequently file for bankruptcy.