subject: Understanding the Process Involved in Property Foreclosures [print this page] Understanding the Process Involved in Property Foreclosures
The steps involved in property foreclosures vary depending on the agreement between the lender and the homeowner. Laws governing foreclosures may also differ from one state to another. People who are having difficulties paying their mortgage loans should exert effort to learn the foreclosure process to have a better chance of avoiding it.
How Homes Get Foreclosed
Foreclosure happens when a homeowner defaults on his mortgage loan. After a certain period of time, the lender or bank that holds the mortgage can foreclose on the house and sell it to recover the amount lost from the loan default or take over ownership of the property through repossession. The actual process starts when the lender files a default notice called Lis Pendens or Notice of Default.
What Homeowners Can Do
A homeowner can retain his property if he can pay the loan and make it current. In most cases, a homeowner negotiates an agreement with the lender and they agree on a time frame within which the homeowner will have to pay for the amount that he was unable to pay for in time. Another option is for the homeowner to sell the house before it gets foreclosed and use the proceeds to pay for the loan.
Homeowners can also avoid actual property foreclosures by selling their houses through a short sale. This is a process wherein the lender will allow the owner to sell the property for a price that is less than what is owed on the mortgage. The advantage is that the borrower or homeowner will not have a negative foreclosure record on his credit records. The home can also be sold in a public auction if the homeowner fails to pay the loan during the grace period provided by the lender but before the actual foreclosure takes place.
If the homebuyer failed to use any of these options, the lender will foreclose the property and sell it either through an auction or as a real estate owned or REO property. For property foreclosures buyers, they have the option to bid on the property during auction or buy it directly from the bank as an REO home by approaching the lender directly and making an offer.
