Process of Foreclosures

Overview
A foreclosure allows a lender or beneficiary to recover the amount owed on a
defaulted loan through the public auction of a property.

When a borrower defaults on a loan, the lender or beneficiary, using counsel, files a public notice to start of a foreclosure.
Foreclosure can end in one of the following ways:

• The borrower reinstates the loan by paying the defaulted amount during the
  pre-foreclosure period.
• The borrower sells the property to a third party during the pre-foreclosure period; allowing the borrower to pay off the entire loan amount and avoid having a foreclosure on their credit history.
• A third party buys the property at the foreclosure auction.
• A third party buys the property at a public auction.
• The lender or beneficiary takes ownership of the property at the foreclosure auction. The lender or beneficiary can take ownership either through a deed in lieu of foreclosure or if no third party bids at the public auction. These are known as bank-owned or Real Estate Owned properties (REO).

Steps to Foreclosure
During the foreclosure period various actions must occur before the property can be sold at auction. At any point in the process a foreclosure can be stopped or the sale date can be postponed.
The foreclosure time line can be broken into four stages:

• Pre-Foreclosure Period (Notice of Default): This is the time to research the property, determine property valuation, and possibly contact the owner to negotiate a pre-foreclosure sale.
• Foreclosure Period (Notice of Trustee Sale): The auction day is scheduled, but is frequently postponed due to:
• Bankruptcy
• Title disputes
• Debt disputes
• Delays can be hours, days, or weeks, so it is important to track the property status.
• Auction Day: It is important to do proper research prior to auction day. Public auctions are where the property is sold "as-is" on the court house steps. Buyers usually must pay in full at the time of purchase, so you must have "cash in hand" or arranged special foreclosure funding.
• Post Auction: Properties are owned with a free and clear title by the winning bidder. Any properties not sold to a third party become Real Estate Owned properties (REOs).