You’ve probably heard the term “foreclosure” before and know that it has to do with losing property, but do you know what it means and how it works? Here, we’ll discuss what foreclosure is and what that means for homeowners and home buyers. Keep reading to learn everything you need to know about foreclosure.
Foreclosure is when a homeowner cannot or does not make mortgage payments to their lender. When that happens, the lender can take ownership of and resell the house.
The foreclosure process can take place in one of two ways:
Judicial foreclosure is when the homeowner goes to court to contest the foreclosure process initiated by their lender.
A nonjudicial foreclosure does not involve the courts or legal system. How the process goes will depend on your state’s regulations.
See below for how the foreclosure process goes and what happens once the house has been foreclosed.
A home will not go into foreclosure unless the borrowers have stopped making payments or have missed too many. They are giving up ownership by not following through with their end of the loan agreement (that is, to make payments in full and on time). Don’t forget – until the mortgage is paid off; the lender can start the foreclosure process.
After several months of missing payments, the lender can either file a lawsuit or give a Notice of Default (NOD). This is written notification that the lender intends to take back the home unless payments are made.
When public notice is given, the foreclosure process begins. Homeowners will generally have around 90 days to make payments or agree with the lender. Many borrowers in this situation may pay the balance in full, sell the property to pay off the loan, or sign the deed over to the lender immediately.
The lender may put the home up for auction to recoup money lost on the neglected loan. The starting bid is usually set at the remainder of the loan balance. For example, if the home costs $100,000 and the owners defaulted when they still owed $60,000, the minimum bid may be set at $60,000. The home will be sold to the highest bidder.
Sometimes, a lender won’t sell the house at auction, especially if there is a limited number of cash bids. In that case, the house leaves the foreclosure process and becomes real estate-owned property. That means the lender is in full ownership and is responsible for paying property taxes and maintenance costs.
Have more questions about foreclosure and what it means for you? Get in touch with Quinn & Associates. Our experts will be able to help you in the event of a foreclosure, so contact us today by calling (508) 588-5600, or by sending us an email at firstname.lastname@example.org.