There is a mysterious process that takes place between the early stages leading to foreclosure and stretching to the point where that home can be listed for sale. For those that have had personal experiences with foreclosure they are fully aware of the devastating power the process can have. The buyers of these properties often just see foreclosures as a good property value. Understanding how a home goes from foreclosure proceedings to being listed for sale will lift the shroud of mystery that surrounds this process.
Pre-Foreclosure: part one. At this point the foreclosure process has not officially started yet. The borrower is just starting to have trouble making the payments. In the eyes of the law the borrower is in default on their mortgage terms. The mortgage contract usually states that after a payment is more than two weeks in arrears the payment is considered officially late. This initiates the next phase of the foreclosure process.
Pre-foreclosure: part two. If payments continue to be late for more than 45 to 60 days the lender will send a demand notification. This notification is sent by registered mail to the borrower. The demand notification letter informs the borrower that they have broken the mortgage contract. This is the first time that homeowner sees the word foreclosure. At this point there is still hope for the homeowner to reverse the situation. The official letter will provide you with detailed instructions to correct the arrears or make arrangements to do so.
Pre-foreclosure: part three. After the homeowner is 90 days in default on their mortgage the mortgage company will engage a lawyer to review and take the lender?s claim of default to the state court. There are two types of foreclosure processes, judicial processes and non-judicial processes.
The judicial process is predominantly used in states that support lien theory. Lien theory is basically the idea that the lender has the legal right to prevent the sale of the property of the transfer of the deed. During this process the intention of the lender is to take legal action against the borrower. Lenders are required to show evidence of default in court. The evidence in these cases must support a property lien by the lender in order to recover their money.
The non-judicial or title theory process uses the deed to secure the contract. A third party trustee is employed to assist the lender with the sale of the property if the borrower cannot pay their debt.
Auction phase. This phase marks the official beginning of the foreclosure period. The borrowers property is auctioned in an attempt by the lender to recover their money. The property is auctioned at the courthouse and the high bidder is awarded the property. At this point the homeowners right to home are terminated by the auction sale. However in some cases the homeowners are granted a redemption period in which their rights to the property are retained for a period of time.
The redemption period. The length of redemption periods is governed by state law. The homeowner is granted access to the property and is allowed to gather the money necessary to purchase the home outright from the lender. This requires the homeowner to pay any outstanding balance on the home as well as accrued penalties. If the homeowner is not capable of repaying the balance owed by the end of the redemption period the new owner is legally required to sell the property.
Post Foreclosure. This is the final stage of the foreclosure process. The property is now owned by the mortgage institution, however it is not sold yet. The redemption period is over and the borrower was unsuccessful in paying the debt back. The new owner has several sale options they can choose at this point.
Buyers interested in buying foreclosed homes need to be aware that laws vary from state to state. It is strongly recommended that the buyer seek professional, legal and real estate advice before proceeding. Finding a property that suits the buyers needs is easier with an understanding of the foreclosure process. There are many online real estate services that can help with the foreclosure search and many realtors offer up to date foreclosure lists for clients.
The foreclosure process is outlined here but the reality of the situation is that homeowners often go through a series of foreclosure proceedings prior to the final foreclosure process. It is in the best interest of the lender to find a way to assist homeowners to maintain ownership of their property. Financial institutions are not in the home ownership business they are in the business of lending money. As a result foreclosure is their last resort to recover some or all of the money they have loaned for the purchase of the home.
With high foreclosure rates being common over the last few years and rising rates projected throughout 2011 the Federal government has stepped in with homeowner assistance programs to help curb the foreclosure crisis. Government intervention is just the first step to correcting this serious problem as we move forward. Minnesota short sales are another avenue open to homeowners to minimize the financial impact associated with a foreclosure.
Buyers should recognize that this crisis is part of a long overdue market correction. Years of artificially inflated home values due to questionable lending practices led to a collapse of the mortgage industry and created an environment of deflation in relation to home values. Pricing in most metropolitan areas has dropped creating a much more affordable real estate market place. Home buyers are seeing the benefits of record low mortgage rates and increased buying power to the above average percentage of homes going into foreclosure.
Homeowners that are in a distressed situation and are facing foreclosure should realize that they are not alone in this situation. Market experts have predicted more foreclosures on the horizon for the foreseeable future. Lenders are seeking actions that can maximize their financial returns. Short sales as well as foreclosures will be a large portion of the real estate market for the next few years as we adapt to the rapidly changing economy in the United States. You can know more at
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