One of the most prevalent, hard-hitting issues affecting the real estate market today is foreclosure. Most people, while terrified of this word, do not understand the specifics, the process, and the anatomy surrounding the concept. While it may be a worrisome topic, it does not have to incite the terror associated with it; simply familiarizing yourself with the facts can help you rest easier. Whether you are a College Station or Bryan homeowner worried about default, a homeowner who simply wants to understand the basics, or a potential home buyer looking for a deal on a home, this information is absolutely invaluable.
For starters, rules governing foreclosure originate from the lien note and the mortgage. The lien note, also called the promissory note, is the first source. This is the document that a borrower signs pledging to pay the amount of the note according to the terms and conditions. This also contains the borrower’s personal liability to repay the balance of the note if a foreclosure sale generates insufficient revenue. The mortgage, also called a Deed of Trust, is the second source I cited. When this document is signed at closing, a borrower is granting the lender a security interest in the property; it is the collateral for the loan.
When homeowners default on their mortgage, their property is considered to be in the state of pre-foreclosure. Typically, lenders will respond quickly to the first late payment. It is preferable for them to work out a solution than to begin the foreclosure process. For this reason, a homeowner in this position would be wise to respond to the lender’s letters or attempts at contact. Many options can be discussed; perhaps a lender would allow for partial payments, interest only payments, or a new program that may allow for smaller monthly payments.
The next step in the foreclosure process is called a short sale. This is where a secured real property is sold, but produces less money than is owed the lender. In this situation, the lender is essentially cutting its losses by agreeing to a negotiated sale, rather than experiencing the delay and expense of a foreclosure. Even though the lender is not on the title, at this point in the default, the lender is positioned to call the shots.
Default is the final step on the road to foreclosure. Once a default occurs, the lender may declare the full amount due and payable. For residential loans, the lender must give the homeowner 20 days written notice to either pay or make good on the payments in default. The law requires that this notice must be sent by certified mail, return receipt requested. Once this is done, the property is requested to be sold. The trustee will send a note to the debtor, and also file this note at the courthouse and in deed records. This alerts the public that the property will be sold on the first Tuesday of the month (occurring 21 days after the notice was posted and filed).
On the appointed date, a public sale will be held at or near the county courthouse. The consumer who purchases a property at a foreclosure sale is considered buying “as is.” That means any repairs, liens on the home, etc. must be paid by you. That said, purchasing a foreclosed property in Bryan or College Station is an extremely profitable move during these soft market times. If you have any questions about the foreclosure process, would like help with a short sale, or want advice on purchasing a foreclosed home, feel free to contact me.
Clay Lee – Realtor
Century 21 Beal, Inc.
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