Understanding Foreclosure

By Matt Unangst, 23 Jan 16:03

• Lender does not want to foreclose – try to work out something ahead of time
• Trustee must file a notice of default with the county recorder’s office
• Lender can require a full payment or public sale
• Owner has until 5 days before sale to bring loan current
• Beware buying foreclosed properties due to various risks
• Contact title company for further information

The real estate boom of the last few years led huge numbers of people to buy property, financing their purchases with sub-prime interest rates. Many of these people expected interest rates to drop and home prices to continue on up, but since this has not happened, they are struggling to make payments on their properties. As the sub-prime mortgage crisis reaches new heights, more and more are facing the problem of foreclosure.

If you are facing the possibility of foreclosure, stop and think about your situation for a minute. Few lenders would rather foreclose on a property than receive money for it. A lender is not trying to sell houses and would rather work out a new payment plan with you than try to deal with foreclosing and reselling your property. The farther in advance you can contact the lender, the better alternative financing options you are going to get.

If you have already missed payments and neglected to work out alternate financing with your lender, the lender may decide to foreclose. When this happens, the lender will request that the trustee, often a title company, file a notice of default with the county recorder’s office. A copy of this notice will be mailed to you.

If your default is due to you not paying a balloon payment when it came due, your lender may require you to pay the full amount remaining on the loan in order to cure the default. If you are unable to do so, the lender can put the property up for a public sale.

Notices of a public sale must be published in the newspaper and posted in a public place, usually a courthouse, for three consecutive weeks prior to the sale. If your property is being sold, you have up until five days before the sale to make good on your loan. If you do so, the deed of trust will be reinstated and your monthly payments will continue as before.

If you do not manage to make your loan current or work out alternate financing with your lender, your property will go up for sale. Buyers of property at a public sale must pay by means acceptable to the trustee, usually cash or cashier’s check. The lender may “credit bid” up to the amount being foreclosed upon.

Buyers of foreclosed properties must deal with a few issues themselves. Foreclosed properties often come with overdue taxes, liens, and/or clouded titles. Title insurance may not be available on foreclosed properties, and if it is available, it may come with restrictions. Buyers should check with a local title company prior to buying any foreclosed property.

KEYWORDS: foreclosure, title company, real estate, homes for sale, public sale, houses for sale, title insurance, liens, clouded titles

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