Knowing how the foreclosure process works in real estate may help you stay in your home one day. Foreclosure is just a way for the lender to get back some of the money they have invested in your properties mortgage.
Just think if you sell a bicycle for $100 and you financed the bike to the buyer for $5 a week and they stopped paying what would you do? You really don’t want the bike back you would rather have the money promised to you but if you could take the bike back and sell it to someone else you might get the money owed to you. That is pretty much what a foreclosure is.
Believe it or not banks are not in the business of owning or selling houses. They really do not want your house and once you quit paying your mortgage they have to get the money they were expecting out of it. They would be perfectly content with just collecting your mortgage payment each month.
Now back to the bike if someone is making payments on time for the bike and then they call you and let you know they will not be able to make the payment next week you are more than likely not going to go get the bike and try to sell it. You will probably say ok and they will miss the payment or you may even just reduce the payment for a week or two.
Same with a bank if you just start missing mortgage payments and do not call the lender and explain the situation your mortgage will probably be put in default and the lender probably will not be to helpful when they do finally get a hold of you they will probably expect you to make up what you have missed. Might not hear from them for missing just one or two mortgage payments but if you do not contact them and they have to contact you it may be to late to stop the foreclosure process.
Lenders usually will hire a local attorney to do the local filing and posting in newspapers. Also law vary with each state so having a local attorney helps them do the process correct. The attorney may even try to contact you to arrange for loan payment. But by this time is us usually to late for that and the attorneys office will file suit and sue you in local court on behalf of the lender. You will be requested to appear in court. Most people do not attend this hearing for one reason or the other. So the courts rule in favor of the lender and the lenders attorney then starts the process of the Sheriff Sale.
For the Sheriff Sale in most states it will need to be published in the local newspaper for a period of time before the sale. And most owners will not know if it until one of the neighbors tells them or asks them about it. At this point the foreclosure process is moving along at a fast pace and you may not be able to stop it if you have them means.
At the Sheriff Sale the property will be auctioned off at a set starting price. May vary form state to state and county to county with in the state. Most of the time the lenders end up purchasing the property back. After the Sheriff Sale the homeowners will not be listed as the owners and will not have any rights to the property for selling or for living in it. Unless the state allows for a redemption period.
After the Sheriff Sale is confirmed and a owner in listed on the records the next step is the eviction process. The homeowner will be sent paper work form the lenders attorney again asking them to appear in court. The purpose of this hearing is to set a date for the homeowner to leave the property. If the homeowner actually appears for this they may be given more time to leave or maybe even a chance to purchase the property back. If they do not appear the lender will be given possession of the property and the sheriff will be order to conduct the eviction.
The sheriff will show up to do the eviction sometimes in as little as a week or may be a month depends on the sheriff schedule. The Sheriff will typically post a notice on the property three days before the scheduled eviction. Hope you have your bags packed and somewhere else to put them because if you are still in the house when the sheriff shows up they do not usually let you start packing your bags they will tell you that you have 30 minutes to be gone.
Once your gone the property will probably be listed with a local real estate company for sale. Here the lender hopes to get some of the money back that is owed to them. Sometimes they do but most of the time they will have to take less than the mortgage they foreclosed on.
When I was an agent you could always tell a foreclosure without even looking at the paper work. Once you put the key in the door and unlocked it and pushed open the door. That is if the door would open. As the door opened the smell would roll out and knock you over. Most in Fort Wayne would smell like wet dog mixed with a little mold. Seems like the older houses didn’t mold as much as the newer houses. The older ones were not a sealed or well insulated as the older ones so I guess the mold didn’t grow in them as quickly.
The longer a house sits empty especially where the weather changes like here in Fort Wayne the worse the house becomes. If the house is half way decent the asset company would let us keep the heat on during the winter. But if the house was probably not going to sell for much to begin with they would just have it winterized. Once winterized the property just seemed to fall apart not over night but I remember one that was for sale when I first started selling houses and it was in pretty good shape but was in a less desirable location in the city. It was for sale a year and a half later still and when I showed it then the roof had started leaking and the plaster started falling off the walls and the hardwood floors were buckling. Not only that but someone decided to break into it and steal all the copper plumbing. But as the house sat and the weather outside changed over time the air inside the house got hot and cold sometimes fast and caused things to happen inside the house and it pretty much fell apart just from sitting there.
Foreclosures can be a good deal. You just want to stay away from one that has been empty for a long time if you can. The longer it has been empty the more likely you may find things worse off than you thought when you walked through the property.
You can tell how long the property has been in possession of the asset company from the real estate agent by the listing or the winterization stickers on the sinks but you can not tell how long the house has sat empty before the asset company took it over. Usually the first thing the asset company does is have the property secured.