Creating a Positive Future with Bank-Owned Investments

The foreclosure routine differs from state to state due to varying laws, but there are multiple unifying aspects. In basic terms, a foreclosure happens when a mortgage company seizes a property from its owner because they are not paying toward the loan. There are multiple steps to this process. The initial step is a notice of default, which is typically filed with the county recorder's office about three to six months after the borrower has ceased fulfilling their financial obligation.

When a notice of default is filed, the property owner has a period of time to request that the loan be reinstated by negotiating with the mortgage company on terms to get up to date on the loan or to renegotiate the terms of the loan. If the borrower is unable or does not agree to terms to get the loan current, a notice of sale is publicized that gives a date for the home to be sold at auction.

Once a notice of auction is issued, the bank means to carry through on its right to repossess the property for the reason of nonpayment. Normally, an auction takes place to sell the home for the maximum price. At the auction, the mortgage company will set an opening bid, or reserve, which generally amounts to the balance of the loan and unpaid interest and any other costs associated with the process, like legal fees. If no offers meet the reserve price, the lender will buy the home, making the home bank-owned or real estate-owned. The lender frequently buys homes sold at auction because the home is valued at less than what is owed to the lender. When you purchase a bank-owned home, it generally comes with a clean title. However, in the majority of instances the buyer assumes responsibility for property taxes.

A home in foreclosure can be purchased outside of the auction process. Prospective buyers are able to contact the owner and endeavor to bargain for a short sale, which is when the lender agrees to sell the home for less than is due on the loan. A short sale is typically more complex than a traditional transaction, but buyers can find some excellent deals if they are willing to work with the seller and their mortgage firm to bargain for a deal.

The initial step in a short sale is to resolve on an agreement on price with the seller. When that is through, the buyer will have to contact the loss-mitigation department of the bank that holds the mortgage on the property. The loss-mitigation representative will be the person who can grant the short sale and tell you what information is needed before an agreement can be reached.

Because a short sale can be involved, it is imperative to retain the services of an qualified real estate attorney who can represent you during the process. Buyers should also be conscious that homes purchased in a short sale are sold as found.