Foreclosure Basics

WHAT IS FORECLOSURE?

Recently, millions of Americans are experiencing foreclosure as a result of not being able to afford their mortgages. Do you know what foreclosure is? Do you understand how and when foreclosures happen? What is the impact of foreclosure on credit? Are homeowner's that are going through foreclosure going to ever have the opportunity to get their home back? Can you buy a home that is in foreclosure? No matter if you are a homeowner or buyer or an investor looking to take advantage of a good foreclosure purchase deal, it is critical that you understand how the process of foreclosures works.

Foreclosure is the last phase in a course of action a lender takes when attempting to recover their money from a borrower that has defaulted on their loan. The bank will either sell or seize possession of the home with the end result being a bank foreclosure or foreclosure auction.

The last stage on the way to foreclosure is the notice of default, also known as the NOD. At the conclusion of the NOD, there is a reinstatement period in the process prior to the house being put for sale at auction. If the homeowner is unable to catch up on the defaulted loan during this time frame, a notice of sale will be posted at the property, sent to the owner and listed in the newspaper and the home is placed for sale at auction.

During the auction phase of the foreclosure process, the home can be sold to the highest bidding party. The highest bid must satisfy the reserve that is set by the bank to recover their loan balance, interest and additional fees. If their is no bidding price that meets these terms, the property will become repossessed by the bank. At that moment, the home will become bank or REO (real estate owned property) and can now be bought directly from them, usually with a clean title.

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