October 6, 2009 | Leave a Comment

Foreclosure is a process that allows a lender, most times a bank, to recover the amount owed by selling or taking ownership of a property securing the loan. The foreclosure process begins when a homewoner defaults on mortgage payments. The lender will then file a default notice against the property owner. Foreclosure can end up in one of four ways:k2070517[1]

  • The borrower reinstates the loan by paying off the amount owed to the lender during a specified grace period.
  • The borrower sells the property to a 3rd party during the foreclosure period.
  • A 3rd party buys the property at a public auction at the end of the foreclosure period.
  • The lender takes ownership of the property. The lender then will attempt to sell the property in the public market.

Sometimes a property can be bought outright when it’s in pre-foreclosure. The borrower can walk away with any equity in the property and avoid having it affect their credit.

Public auction involves potential buyers bidding on a property at the end of the pre-foreclosure period. Buyers are often required to pay cash at the time of the auction and may not know of the condition of the property or of any title issues. A public auction can sometimes be a great way to get a good bargain if you don’t mind not knowing the specifics before you buy.

In a bank-owned or REO the lender will usually re-sell the property to recover the unpaid loan amount. The lender will typically clear the title and make some repairs to the property. REO homes are discounted less than pre-foreclosed homes or auctioned property.



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