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Stages of Foreclosure, Part 2

 In Part 1 of our Stages of Foreclosure posts, we looked at what a bank does to legally begin the foreclosure process. Once all the paperwork is filed, an auction date is set and the current owners have the ability to try and pay back (or negotiate) their missed payments. This is known as the reinstatement period, and it typically lasts till five days before the auction. When that time is up, the homeowners are out of luck and the home is put up for auction.

During this process, the bank does its best to get the word out. The Notice of Sale is publicized, all leading up to the actual auction. Most of these auctions happen at the county courthouse (if you’ve been hunting foreclosure homes to invest in, there’s a good place to keep your eye on).

The Foreclosure Trustee Sale (auction) has its own unique circumstances. The opening bid is set by the lender, and this figure is usually based on the outstanding loan balance, accumulated interest, and accumulated fees and taxes. After all, the bank doesn’t want to lose money on the proposition, so all of those logistics have to be paid for. Foreclosure auctions have limited audiences because one of the rules is that you must pay with cash — a deposit up front and the remainder within 24 hours. Again, that is because this is the bank’s property — they don’t want their missed loan to potentially open up to another missed loan. No, it’s gotta be cash, and it’s gotta be ready. When a winner is named, he or she receives the trustee’s deed to the property as-is; no additional repairs or perks are included.

That’s why these properties can be a steal for wealthy investors and fairly difficult for average folks like you or me. And it’s also why many of these properties don’t have any actual bids. In the case of no bids, the lender’s attorney makes a bid on behalf of the bank and the home becomes property of the bank. In industry terms, it becomes REO: real estate owned.

REO homes have their own unique market and sale cycle. We’ll cover that in a future post.

Search for foreclosure homes www.bestreohomes.com


Posted: Tuesday, February 23, 2010 3:30 PM by Israel and Rachel Gonzalez

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