Hopefully, none of our readers have found themselves on the homeowner side of a foreclosure. While foreclosures can be an incredible investment opportunity (which we’ll talk about soon), let’s take a moment to review exactly how the process of foreclosure works for the bank and homeowner.
After three to six months of missed mortgage payments, the lender orders a trustee to order a Notice of Default. This officially notifies the homeowner that they are in default and starts the clock ticking on a reinstatement period, known as pre-foreclosure, that runs until five days before the home will be auctioned off.
During pre-foreclosure the homeowner can sell the house to a third party. The benefit to this is it allows them to pay off the loan and avoid having their credit tainted with a foreclosure. A foreclosure will follow you around for about ten years. If the default isn’t corrected within three months, a foreclosure sale date is announced. The Notice of Sale is recorded at the County Recorder’s office, posted on the property, sent to the homeowner, and published in local newspapers.
Just like in the movies, the property is auctioned off to the highest bidder on the county courthouse steps. The transaction must be made in cash within 24 hours of the sale.
And that, ladies and gentlemen, is how foreclosure works.
The Young Wealth Team