Foreclosure Process in Real Estate
Foreclosure is a legal process in which the lender (from where the loan amount is disbursed) takes the property back when the owner of the property fails to make the payments of the mortgage/loan.
It may vary or differ by state. In the foreclosure process, the borrower must be informed or notified regarding the proceedings. Usually, in the case of a foreclosure, the property of the owner is being seized and sold.
Types of Foreclosure
If the lender files a lawsuit, then it is termed as the Judicial Foreclosure and without the lawsuit (not going to the court) it is termed as the non-judicial foreclosure.
In this type of foreclosure, it requires the process to go through the court. In the court, the borrower can raise defenses from his/her side.
In simple words, this process is the opposite of Judicial Foreclosure. It is done without filing a court action.
It happens when the agreement of mortgage has the power of sale clause in it.
This clause gives the right to the lender to foreclose the property by itself. If this clause is not in the agreement then the lender will have to take the borrower to the court.
Stages of Foreclosure
Foreclosure processes may seem complex but truthfully, it is not very difficult to understand the process of foreclosure.
Throughout the whole foreclosure process, there come many stages in which the homeowner has chances to avoid foreclosure.
Missed less then 3 payments, then you are saved from foreclosure and if you have missed three or more payments, then the lender can legally initiate the process of Foreclosure.
The phase is very important because this is the only phase when the owner has most options and secondly you will have to pass this before the process of foreclosure begins.
If you are the one who is in the stage of missed payments, then it is the time when you rework on your finances. Talk to your lender for a compromise and make the fast sale of your home.
Once you missed the three payments (monthly), then the Pre-Closure process begins. In this period, the lender records a public notice regarding the mortgage and also send the same to the owner.
This notice is called as a NOD (Notice of Default).
Well, this stage is a grace period to the homeowner as it provides the owner three months to correct it. So simply sell the home and get the cash or make some arrangements with the loan provider or lender.
Post Foreclosure Process:
At the auction of the home, if no one or the third part doesn’t purchase the house or the property, then the lender takes the ownership of the same.
After this, the property becomes the REO (Real-Estate Property) or the Bank-Owned Property.
Once you received the NOD (Notice of Default) and the default is not cured in the next three months, then the lender fixes a date for the auction of the home.
The home is sold at an auction which is called as the Trustee Sale. The auction is also published in the local newspaper so that everyone knows about it. The homeowner also gets notice of the same.
The foreclosing lender sets an opening bid at the auction of the house. The total outstanding amount is the opening bid which also includes the interest or any other fees.
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