A foreclosure occurs when a property owner cannot make principal and/or
interest payments on his/her loan, typically leading to the property being
seized and sold.
Stages of Foreclosure
The foreclosure process is not very difficult to understand. There are
several stages during which the homeowner has an opportunity to bring the
loan current and avoid foreclosure.
After about three to six months of missed payments, the lender orders a
trustee to record a Notice of Default (NOD). At the County Recorder’s
Office. This puts the borrower on notice that he or she is facing
foreclosure and starts a reinstatement period that typically runs until
five days before the home is auctioned off.
If the default isn’t corrected (the loan must be brought current) within
three months, a foreclosure sale date is established. The homeowner will
receive a Notice of Sale, and this notice will also be posted on the
property. In addition, the Notice of Sale is recorded at the County
Recorder’s Office in the county where the property is located. Finally,
this Notice of Sale is also published in newspapers local to the county in
question over a three-week period.
The foreclosure Trustee Sale typically occurs on the steps of the county
courthouse in which the property is located. The time and location of this
sale are designated in the Notice of Sale. At the Trustee Sale, the
property is auctioned in public to the highest bidder, who must pay the
high bid price in cash, typically with a deposit up front and the
remainder within 24 hours. The winner of the auction will then receive the
trustee’s deed to the property.
Foreclosure Auction
At auction, an opening bid on the property is set by the foreclosing
lender. This opening bid is usually equal to the outstanding loan balance,
interest accrued, and any additional fees and attorney fees associated
with the Trustee Sale. If there are no bids higher than the opening bid,
the property will be purchased by the attorney conducting the sale, for
the lender.
If this occurs, and the opening bid is not met, the property is deemed a
REO or Real Estate Owned. This typically occurs because many of the
properties up for sale at foreclosure auctions are worth less than the
total amount owed to the bank or lender.
When you purchase property at a foreclosure sale, all junior liens other
than property taxes are wiped out. Priority of liens is determined by the
date of recording. When you purchase an REO aka Bank Real Estate Owned,
you will typically receive the property with a clean title.
The Dennison Capen Group has both Certified Distressed Property Expert or
CDPE, and Short Sale Foreclosure Resource or SFR designations. Let us
help you understand the advantages and liabilities in searching for these
types of properties.
