What is a Foreclosure?
Foreclosure is the process where a lender seeks possession of the security (home) when a loan has not been paid. While the process is similar in some states, each state does have it’s own process, timeline and procedures. Our goal is to provide our users with as much information as possible regarding the
procedures for any state in which they have an interest.
The process typically starts with a lender recording a Notice of Default or a Lis Pendens providing official public notice the process has begun. This stage is usually considered the pre-foreclosure stage where the property owner still has full rights to refinance or convey the property. The next step is the public auction held in a public place in the county where the property is located, or in some cases the auction is held in front of the property being auctioned.
Auctions are frequently postponed, but after a successful auction, the property will have a new owner, either the lender auctioning the property, or a third party bidder.
After the auction, if the lender was the high bidder, the property is lender owned, or REO. Real Estate Owned property is then usually repaired to bring it to market standards and listed for sale with a real estate agent.
Foreclosure Auction Process
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 a REO aka. Bank REO, you will typically receive the property with a clean title.