Understanding Foreclosures
How often have you heard that foreclosed properties are cheaper? In reality it is a misconception and many house buyers could get captured in the vicious catch.
Foreclosure is the procedure that allows lender or the lien holder to recover the money owed on a defaulted loan.
Generally they take the repossession and sell the real estate property to secure the loan.
The process of foreclosure is initiated when the borrower defaults in making the accrued loan payment or defaults conditions of mortgage.
The lender can get a court order for termination of mortgage by filing Notice of Default.
Ending Foreclosure Process
Foreclosure process can end in one of the following ways:
- Lender gives grace period to the borrower to repay the loan. Borrower can in turn pay the accrued amount within grace period and dispute gets resolved mutually.
- Borrower can sell the property proceeds to third party while pre foreclosure period. In this way borrower can repay the amount. By doing so his credit rating won’t take a hit.
- It may so happen that third party can buy the property while the pre foreclosure period is on.
- Lender can also take ownership of the property with intent of selling it to third party.
Foreclosure Timeline
Foreclosure process is very simple and plain. As soon as the borrower defaults, lien is placed on the property for next 30 days. After 30 days, borrower is notified by a court agreement. This is accomplished through Notice of Default, filed by the lender. After 90 days of the notice period, notice of sale is provided to the borrower.
Borrower is given 25 days of period to sell the property to third party and recover loan payment. At the end of the period if property remains unsold lender may take possession of the property anytime.
Potential buyer fails to realize that lender wants to recover their money back. At times they may take more time, not because of the reason that property remains unsold because of foreclosure concerns but they may wait to get better deals or offers.
