Foreclosure Process Overview

An Overview On The Foreclosure Process

Buying foreclosures has become one of the best ways of investing today. With foreclosures, anyone can own a home without having to cough out the huge sums of money like is the case when building or buying regular homes. This article outlines an overview of the foreclosure process.

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At times, some homeowners face difficulties and are unable to repay their mortgage loans. This leads to their properties being foreclosed upon. When the homeowner fails to make his mortgage remittances within a specified time, the lender will send him a Les Pendens or a Notice of Default. The notice warns the homeowner that he risks being evicted from his home if he does not bring up his loan to current. It further indicates that the house will be sold by the lender in an effort to recover what the homeowner owes them in defaults. There are 4 possible scenarios that can arise when the homeowner is served with a Les Pendens. These are:

• The homeowner may make all the due payments to bring his loan current. There is a grace period he is given to make the payments. This stage is known as a pre-foreclosure period and different states have differing grace periods.
• The homeowner can sell his property and then use the money he will get to offset the remaining balance, including the principle and all fees.
• The property can be sold at a public auction for pre foreclosure sales.
• The homeowner can be evicted by the lender, who will then place the house for sale in the market. At this stage, the home is known as an REO (real estate owned).

During a pre foreclosure process, an interested buyer can liaise with the homeowner to buy the home. This action is beneficial to both parties as the buyer get a discounted property while the homeowner can retain some equity stake in the home and his credit history will also not be affected.

At the end of the grace period, the final foreclosure process begins. The property can be sold at a public auction if the homeowner will not have cleared his defaults. Those buying at the auction must pay a deposit for the home and clear the remaining balance within 24 hours of the fall of the hammer.