TWO OPTIONS WHEN IN FORECLOSURE
The first option for a pending foreclosure on your property will be to obtain the necessary funds, somehow and in some way to bring your payments current or have the choice made for you…. be evicted and having the property being taken by a future ruling resulting in a court process with your lender having the legal upper hand by your signed paperwork and forcing you to leave.
The general definition of foreclosure is as follows: Foreclosure is the legal process through which a property has been pledged as collateral for a debt or a mortgage loan, and is foreclosed on by the lender because the borrower(s) stopped payments and have defaulted on the obligation by failing to meet agreed upon repayment terms contained in the loan agreement or promissory note.
JUDICIAL FORECLOSURE PROCESS
Approximately one half of all the U.S. states operate with a judicial foreclosure process. Where the foreclosing lender files a lawsuit to foreclose on the property and will then name defaulting borrower as the defendant, with other lien holders may have gained an interest in the real estate property after the recording of the mortgage has been checked for any additional chances.
The defaulting borrower(s) and any other lienholders are collectively known as defendants in the foreclosure case, are then notified of a pending lawsuit filed against them by the prevailing court.
In addition, the notice of the pending lawsuit, called a Lis Pendens is recorded as public notice with the county recorder’s office. The borrower has 20 days in most cases to respond by sending a a written reply to the lawsuit. With no response made, or court (judge) rules against the reply, the court can order the mortgage loan to be foreclosed and the property will be sold at a public auction.
ORDER OF STEPS IN A JUDICIAL FORECLOSURE
The lender files a lawsuit in court to foreclose the mortgage loan. The borrower will receive a certified mail notice of a court hearing date. The judge at the court initial hearing can dismiss the case or issue a judgment against the borrower and can order the loan be foreclosed on. Following a mandatory redemption period which gives the homeowner an opportunity to redeem the defaulted loan by a payoff or a reinstatement, a public auction date is then scheduled. As mentioned earlier, the public foreclosure auction or pending sale is going to be advertised by public notice.
The property is then sold to the highest bidder. If no acceptable bid is made, the lender takes the property. The judge can also award the lender a deficiency judgment against the borrower when an accepted bid is less than the amount of the loan. A certificate of title is given to highest bidder once the statutory redemption period or public auction is complete and funds are received.
The borrower without any further motions filed or no recourse, is quickly evicted with personal possessions from the property when served with a 3 day notice and enforced by the Sheriff’s Office.
POSSIBLE THIRD CHOICE
The possible third choice solution can be when the homeowner’s needs and foreclosure problems are solved, and in return realize any gained equity from the owner cannot be captured or used.
A perfect example is a homeowner who hasn’t the necessary funds to maintain the property. If they list their real estate property for sale with a Realtor, they deal with the showings, time (often months) to market your property, and ultimately in most cases you will receive a lower “as-is” type price due to the property condition and being in a position where you must accept the sell.
If the foreclosure auction date has been set and is looming, the owner will need to consider to discount the price even further to get an accepted contract in place and have the sale postponed.
An equity buyout from the owner is one way to solve the homeowner’s immediate problem. The concept is fairly simple and is sometimes referred to as a “subject to” purchase, which means the existing financing stays in place, with a purchase “subject to” that financing. One thing when evaluating any offer is the need to base an offer on the owner’s NET equity, and not the gross equity.
For example, a property listed which needs $5,000 in repairs to obtain $100,000 value, and a loan with $75,000 due (including 2 past due payments). How much equity is there? $10,400 in equity. $100,000 market value in repaired condition. Remove $6,000 due to sales commission using a Realtor charging 6%. $1,500 loss due to closing costs. Title insurance, escrow or closing fee. Self marketing loss of $2,100. Added payments (3) towards the loan while property is marketed. Resulting in a loan balance of $75,000 and the final amount of $10,400 in actual equity.
Knowing selling costs is essential for preparing a realistic net proceeds sale sheet for someone holding a real estate property mortgage loan or for an owner holding the property free and clear.
It provides the homeowner with the costs of sale and allows discussion on the purchase of the actual equity, rather than loan balances and possible home values. When considering net proceeds, pay close attention to the repair costs because underestimated repairs can alter considerably and the real possibility on carry costs may be higher than the three months used in this example.
OPEN TO A FAIR OFFER ON PROPERTY
Consider using 40% of net equity as a fair offer. Although $4,160 might not seem like a whole lot to the homeowner, it’s certainly better than nothing when the foreclosure proceeds and it isn’t realistic to pay more because the loan has to be made current, repairs paid, and holding costs until the property re-sells. If an agreement which works for everyone can’t be reached, move on.
HELP YOU STAY IN PROPERTY OR SELL FOR A FRESH START
If you are in the position of losing your home, without the necessary funds to keep it and dealing with uncertainty, you are invited to become familiar with all the offered services. In making a real estate purchase, have a quick and easy transaction, instant debt relief, fast cash, and avoid the hassles commonly associated with such transactions. Avoid the need to rely on uncertain outcome.
Perhaps forcing you or your family members to become involved in the many legal issues during a foreclosure and still have to endure losing the home with no compensation whatsoever to you.
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After meeting for inspection of your property and market research, you will have a written offer within 72 hours if required to take quick action. Submit property information online to get started.