What Does the Foreclosure Process
Actually Look Like in Practice?
One of the worst experiences a homeowner can go through is a foreclosure on their home. However, foreclosure happens more often than one would expect.
In fact, over 15,000 homes were foreclosed on in August 2021, a rate that's 60% higher than the previous year. While the foreclosure process varies by state, there are some similarities across the board.
Read on to learn about the foreclosure properties process.
What Is Foreclosure?
Foreclosure occurs when someone doesn't have enough money to make monthly payments on their mortgage. In most cases, you can be late by six payments before the foreclosure process begins.
When you take out a loan from a bank, your home serves as collateral. If you can't make payments, you're at risk of losing your home. It's important to understand that the foreclosure process doesn't happen overnight.
If you're late a few days on your payment, you likely won't suffer any consequences. Anything longer than a couple of weeks will typically result in a fee. You can check out URB Chicago to learn more about foreclosure processes in different areas.
The Foreclosure Process
As we mentioned, the foreclosed homes process varies from state to state. Generally, though, this is what you can expect:
Notice of Default
After a certain number of missed payments, the lender will send a notice of default to the homeowner. Typically, the lender will request that you send the missed payments in 30 days or less to avoid foreclosure. This is the easiest way of stopping foreclosure, but it's not always this easy.
A lender will usually not send a notice of default until there have been at least three missed payments. In many cases, they wait until there have been six missed payments to send a notice.
Notice of Trustee's Sale
The process of initiating the foreclosure varies depending on the state. In some states, a nonjudicial foreclosure can be done, which only involves filing paperwork. If this is the case, the foreclosure process can move rather quickly.
Other states have judicial foreclosures, which require approval by the courts. Once the forms have been filed, a lender will schedule a sale of the property.
Once all forms have been filed, the lender will need to advertise the property and state that it'll be available for public auction. Once the property's been placed for public auction, it will be awarded to the highest bidder.
The lender will calculate the opening bid based on the value of the outstanding loan, unpaid taxes, and any liens. If the property doesn't sell during the public auction, the lender will become the owner of the property and will attempt to sell it through a broker or with the help of a real estate-owned asset manager.
Once the auction is over and a new owner has been named, the borrowers are issued an order to evacuate (in the event they're still living on the property).
Often, the lender gives the borrower several days to evacuate so they have sufficient time to move out their belongings.
Foreclosure Process: Are You Ready?
Now that you've read about the foreclosure process, you should have a better idea of what's ahead. While foreclosure is never fun, preparing for the process can help things go more smoothly.
Check back in withour blog to learn more about different real estate processes.