The Foreclosure Process
Foreclosure is a process in which a lender attempts to recover the amount owed on an outstanding property loan once there is a default of payments. This is usually done by selling or taking ownership (repossession) of the property. The foreclosure process begins once the lender files a public notice of default (NOD), or in some states, a lis pendens (LIS).
Once a NOD is filed, the property officially enters a grace period known as pre-foreclosure (length determined depending on state). Pre-foreclosure offers the borrower an opportunity to do several things before the property is repossessed and/or sold, and ultimately reported on their credit history.
The borrower can reinstate the loan by paying off the default amount plus fees.
The borrower may negotiate a Loan Modification with the existing lender.
The borrower can sell the property to a third party and pay off the outstanding loan(s).
Should a loan remain outstanding once the pre-foreclosure period has ended, the bank can repossess the property to secure the loan.
If a home is worth less than what is owed or a borrower falls behind on their payments, sometimes the best financial decision is to negotiate a sale with the lender for less than the debt obligation (aka selling "short"). The sale of the home stops the foreclosure process and can help the borrower's credit. The seller in a short sale is still the borrower, although the bank will need to agree to the sale if the purchase price is less than what is owed. One of the mos.t important parts of negotiating a sale with the bank is making sure the borrower does not pay out-of-pocket for professional fees.
If a short sale does not succeed, the bank can move forward with repossession, sometimes by offering the home at public auction.
Selling a home while under financial stress is an exhausting process, and having an experienced professional help you through it is imperative. The Madison Group has a specialized short sale team that can help you hit the ground running on an already time-sensitive process.
We do the right thing, and we can start by scheduling a brief call or in-person visit to offer some free advice.
Auctions:If a borrower cannot repay the amount owed, the lender can put the home up for auction with the County Sheriff for purchase at a minimum acceptable amount. The winning bidder must pay a cash down payment on site at the time of auction, and the remaining balance is due shortly thereafter. The deed is then transferred to the winning bidder without a guaranteed clear title.
Madison Group has a dedicated team member research properties, attend auction events, and place bids in person, and we can assist any investor that is looking for an expert partner in this process.
Real Estate Owned by the bank after it has gone to auction without any third party buyers. REO is an accounting term that the bank uses to indicate a non-liquid asset. The foreclosing lender can then put the REO up for sale or rent on the local market with a licensed real estate professional.
The Madison Group has been managing and selling REO properties for over 16 years with thousands of these complicated transactions completed. We can help buyers interested in our or our office exclusives that are not yet available to the general public.
Want to learn more? Schedule a free consultation with one of our agents.
- Kobi Timmons