Foreclosure

Foreclosure is a specific legal process where a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan. A property becomes an REO (real estate owned) when the lender takes the possession of a property. The Pre Foreclosure process starts when a borrower stops making his or her payment to the bank. Soon after a payment is missed the bank will try and contact the borrower and if they can not make the payment may issue a “Notice of Acceleration“. The notice of acceleration is the clause in the original loan documents that gives the bank the right to start the foreclosure process if the borrower do not make their payment. The first official Foreclosure step is the “Notice of Default“. The Notice of Default is the step that triggers the start of the actual foreclosure process and starts the clock ticking until the sale at the court house steps. From the time the Notice of Default is filed the borrower has 3 months and 3 weeks until the home is auctioned at the Trustee’s sale at the court house in the County where the property is located. Many times at the sale, the bank is the only one that bids on the home and takes it back. The Trustee’s sale is the official forum where the bank is trying to auction the home off to get back the amount they are owed. Unless the bank discounts the opening bid very few investors bid on these homes as they are at or above market value! 98-99% of the homes revert back to the bank or Government agency at the Trustee’s sale. When purchased at a court house sale the properties must be paid for in full, with a cashiers check at the time of the auction. If the foreclosed home does not sell at the auction, then the mortgage lender places the home back on the open market as a Real Estate Owned (REO) property and sold at the best marketable price.