FORECLOSURE INFORMATION
This is a general overview of the three stages in the foreclosure process.
Pre-Foreclosure
The homeowner has failed to pay the mortgage payment. After two months of unpaid mortgage payments and no workout with the lender, the mortgagor will accelerate the debt and notify the homeowner of the upcoming auction. Up until the day of auction, the homeowner may bring the loan payments current, try to work out a solution with the lender or pay off the note by selling the home or re-financing the loan to prevent the home from being foreclosed. If the homeowner has filed bankruptcy, the bankruptcy trustee is in charge and the homeowner has no control over their own home.
If the homeowner has not filed bankruptcy, we may be able to assist the homeowner in minimizing their loss with a Short Sale, Lease Purchase, Lease Option or other solutions.
Foreclosure
After failing to pay at least 3 mortgage payments, the lender will foreclose on the home. The lender will order the foreclosure attorney to sell the home at auction on the County Courthouse steps. This process is very informal and quick. The mortgagor's attorney will stand on the Courthouse steps to read the public auction notice, then begin the bidding at a minimum bid price as directed by the lender. The minimum bid is usually the outstanding first mortgage balance. If no one bids a higher price than the minimum bid required by the mortgagor, then the lender will purchase the home.
Post Foreclosure
If the lender purchases the home, the real estate is considered a post foreclosure. The loan is charged off against the loan loss reserve and the asset is booked as Real Estate Owned. If the outstanding loan balance is larger than the price paid for the home, the difference is charged off to the loan loss reserve account.
The lender may try to sell the home to investors who have expressed an interest in real estate owned properties but as the inventory of foreclosed properties has increased, the lenders will work to list the home with a real estate agent as soon as possible. Before the lender can pass title to a buyer, any unpaid liens or judgments must be cleared from the title. Also, any federal tax liens must be paid off. Most lenders will list the home "As Is" with no disclosures. A special warranty deed instead of the typical general warranty deed will be passed to the buyer. A buyer typically has the right to inspect the property including any buyer representatives such as home inspectors, termite inspectors and appraisers; but the offer may not be subject to the buyer's right to request repairs.
If you have any questions about this or other real estate questions, please contact us.