Bank Owned Foreclosed Properties
Foreclosure is what occurs when a property owner is 4 months behind paying the full home mortgage. For more information on how important it is to not get behind in your mortgage payments and what to expect, please go here.
To clarify, foreclosure is a legal process by which the home owner forfeits all legal rights to ownership of the home. If the owner can not settle the outstanding debt, or sell the home via a short sale, the home then goes to a foreclosure auction. If the home doesn’t sell there, the lending institution acquires the residence.
To understand foreclosure, it useful to keep in mind that the definition of “house owner” in this situation is in fact a misnomer. “Borrower is a much more suitable term. That’s what a home mortgage, is: a loan agreement for the purchase price of the house, minus the deposit. This agreement puts a lien on the purchased home, making the loan a “secured loan.”
When a lending institution loans you money with no security (credit card debt for example), it can take you to court for failure to pay, but it can be extremely hard to collect money from you. Lenders typically sell this type of debt to outside debt collectors for pennies on the dollar and write off the loss. This is considered an “unsecured loan.?
A secured loan is different because, although the lender may write off the financing if you fail to pay, the lender will recoup a bigger portion of the debt by seizing and selling your home.
So what occurs in at foreclosure? The specifics can vary according to state law, but we can simplify into five stages.
Bank Owned Foreclosed Properties – Phase 1: Missed repayments
Everything begins when the house owner– the borrower– fails to make prompt mortgage repayments. Generally, it’s because they can not, because of challenges such as unemployment, separation, death or clinical challenges.
If you remain in this tough circumstance, it’s important that you speak to your lender asap. There are numerous options to ensure you continue in your home. The foreclosure process costs the lender a great deal of money, and so they try to avoid it just as much as you do.
Often, a borrower may deliberately miss paying the mortgage because the home may be damaged by a natural disaster (to put it simply, the quantity of the mortgage goes beyond the worth of the house) or because he’s tired of handling the home.
Whatever the cause, the result is that the borrower can not or will not meet the terms of the financial agreement.
Bank Owned Foreclosed Properties – Phase 2: Public notification
After 3 to six months of default repayments, the lender records a public notification with the County Recorder’s Office, showing the borrower has defaulted on the mortgage. In some states, this is known as a Notice of Default (NOD); in others, it is termed lis pendens which is Latin for “suit pending.”
Depending upon state law, the lender may be required to post the notification on the front door of the home. This official notification is meant to make borrowers conscious they are in threat of losing all legal rights to the home and may be kicked out from the property. In other words, they remain in threat of repossession.
Bank Owned Foreclosed Properties – Phase 3: Pre-foreclosure
After receiving a NOD from the lender, the borrower enters a period of time known as pre-foreclosure. Throughout this period– anywhere from 30 to 120 days, depending upon state laws– the borrower can work out an arrangement with the lender through a short sale or pay the outstanding amount owed.
If the borrower pays off the default throughout this stage, foreclosure ends and the borrower prevents house eviction and sale. If the default is not settled, foreclosure proceeds.
Bank Owned Foreclosed Properties – Phase 4: Auction
If the default is not payed by the deadline, the lender or its agent (described as the trustee) establishes a day for the house to be sold at a foreclosure public auction (often described as a Trustee Sale). The Notification of Trustee’s Sale (NTS) is recorded with the County Recorder’s Office with notifications sent to the borrower, posted on the home and published in the newspaper. Auctions can be held on the steps of the county courthouse, in the trustee’s office, at a convention facility across the country, and also at the home in foreclosure.
In many states, the borrower has the right of redemption (he can come up with the owed cash and halt the foreclosure process) up to the minute the house will be auctioned off.
At the public auction, the house is sold to the greatest bidder for cash payment. Due to the fact that the selection of buyers that can pay for to pay cash money instantly for a residence is limited, many loan providers make a contract with the borrower (called a deed in lieu foreclosure) to take the home back. Or, the financial institution buys it back at the public auction.
Bank Owned Foreclosed Properties – Phase 5: Post-foreclosure
If a third party does not acquire the home at the foreclosure public auction, the lender takes possession of it and it becomes what is known as a bank-owned foreclosed property or REO (real estate owned).
Bank-owned properties are offered in one of two methods. Usually, they are listed by a local realty representative as for sale on the open market. Zillow lists bank-owned buildings as for sale. Likewise, some loan providers choose to sell their bank-owned buildings at a liquidation public auction, typically held in public auction houses or at convention facilities.
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