The Foreclosure Process
A foreclosure involves a lender recovering the amount owed on a defaulted loan by selling or taking ownership repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on the loan payments (usually mortgage payments) and in turn allows the lender to file a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:
- Paying The Default Amount
The borrower/owner reinstates the loan by paying off the default amount to during a grace period determined by state law. This grace period is also known as pre-foreclosure.
- Selling The Property
The borrower/owner is able to sell the property to a third party during the pre-foreclosure period. Having the home sold allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
- Public Auction
A third party buys the property at a public auction at the end of the pre-foreclosure period.
- Lender Takes Ownership
The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These are also known as bank-owned or REO properties (Real Estate Owned by the lender). This process allows for three opportunities for finding bargains on foreclosure homes.
Pre-Foreclosure (Notice of Default or Lis Pendens):
A property that is bought in the pre-foreclosure period involves an individual or entity approaching the borrower/owner and offering to buy the property outright. The borrower/owner can sell to the buyer at a negotiated price above the loan amount and achieve equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and under the circumstances also has a high bargain leverage to realize discounts of 20-40% below market value.
Auctions (NTS, NFS):
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand. However, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner. Though it is a highly risky investment.
Bank-owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. Typically, the lender will then clear the title and perform needed maintenance and repair. However, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.
We’re not just here to see your Treasure Coast of Florida oceanfront home sold, we’re here to make sure this process is done right and to meet your goals. We’re here for you, not for us. Choose our family to go beyond your expectations — one who is an expert in your ideal neighborhood and fits your lifestyle from Fort Pierce to Singer Island.
Let an AmPro Realty, Inc. Realtor professional provide important advice and help guide you with your questions by contacting us.
