Foreclosure homes are generally of two primary types
, the foreclosure by judicial sale and the nonjudicial foreclosure type, with each having its own specifications and requirements. Although there are other minor types of foreclosures, these minor kinds are not as widely used as the two primary methods.
Judicial Sale Foreclosure
This type of foreclosure is available in all 50 states of the U.S. It involves the selling of a mortgaged residential property under court supervision. The money that will be produced from the sale will be used to pay for the mortgage, with the remaining amount going to the holders of the lien. If enough money is left from the sale after paying the mortgage and lien holders, the borrower or owner of the house will get the rest of the funds.
The process of foreclosure under this type starts when the lender files a lawsuit against the homeowner or borrower. The court will then make a decision after a hearing where both parties are present and are allowed to present their case. Most of these cases are dealt with in a local court, although there are rare instances when a foreclosure lawsuit is filed in a federal court.
Nonjudicial Foreclosure
Foreclosure homes that fall under this type are allowed to be sold off without the supervision of a local or federal court. However, the mortgage should include a clause called power of sale for this type of sale to be allowed. The process involved in nonjudicial foreclosure is faster, cheaper and less complicated than judicial foreclosure. Proceeds from the home sale are provided to the mortgage holder first, lien holders second and to the homeowner if there is any remaining amount.
Other states also offer other foreclosure types like strict foreclosure. The states of Vermont and Connecticut are just two of the states that honor this kind of process. This involves the mortgage holder filing a lawsuit against the borrower to get the court to order the borrower to pay the mortgage within a certain period of time.
The process of selling foreclosure homes vary in terms of the nature of the contract and the laws that govern the process in the location where the property is located. Homeowners would be in a better position if they understand the workings of each type.