Don’t know what a foreclosure is? Well you’re in luck. This entire blog is about foreclosure and its lengthy process! Sounds interesting, right? Let’s jump in shall we…
A foreclosure is when a homeowner’s rights are surrendered due to nonpayment of the mortgage. If the homeowner cannot payoff the remaining debt, or sell the home in a short sale, it will go to a foreclosure auction. If the home does not sell at auction, it then becomes property of the bank. A foreclosed home usually doesn’t go on the market until the entire foreclosure process is complete:
You will find that the foreclosure process varies from state to state, but it always starts with missed payments from the borrower. There are many reasons that could lead to the homeowner missing payments, such as being laid off, recent death in the family or divorce.
In this phase, a public notice is issued by the lender, if the borrower has three to six months of missed payments. Depending on the state law, this notice is required to be posted on the front door of the property in order to inform homeowners that they are at risk of losing property rights.
After borrowers receive this notice, they enter into a grace period called “pre-foreclosure.” This period lasts usually anywhere from 30 to 120 days, in which the borrower can work out a deal with the lender through a short sale, or to pay the outstanding debt owed. If during this phase the borrower is able to pay the outstanding payments, foreclosure ends and the risk of eviction or sale is avoided. However, if the borrower does not, the foreclosure process continues.
If the borrower has still failed to make outstanding payments, the lender sets a date for the home to be sold at an auction. At the auction, the home is sold for the highest bidder for payment to be made in cash. Because not many people cannot afford to pay for a house in cash on the spot, the lender and borrower usually make an arrangement where the lender simply takes the property back, or buys it at auction.
If the home is not sold to a third party at the foreclosure auction, the bank takes ownership of the property – it then becomes a bank-owned property. A bank-owned property usually is listed by a local real estate agent for sale or the bank sells the home at a liquidation auction.
Are you thinking of buying or selling a home, or have a friend or family member who is? Contact The Pivec Group today by calling 443-692-8800 or visiting our website! We look forward to hearing from you and helping you find YOUR dream home!