The most likely result in the foreclosure process is that the homeowner will lose ownership and then possession of their home. However the foreclosure procedures vary depending on which state of the USA.
Let me explain. There are two types of foreclosures and each state of the USA follows either of these procedures.
1. Foreclosure by Trustee Sale
When a property is purchased in the states that follow this foreclosure procedure,
the county issues a deed which a trustee holds until the mortgage is paid. When the homeowner defaults on the house payment, the bank or lender notifies the trustee to begin foreclosure proceedings. The property is sold and the proceeds from the sale goes to the lender to cover the loan.
2. Foreclosure by Judicial Sale
In the states that follow judicial foreclosure, when the homeowner defaults on the house payment, the bank or lender files a claim for the balance of the loan from the homeowners. The courts work out the settlement but this can take up to six months or even longer to resolve. During this time, unless the borrowers can work some solution out with the bank, the chances of losing the home is excellent.
So what happens when homeowners miss a couple of house payments? The lenders send out reminder notices. One will arrive probably a fortnight after the first missed payment. When it time for the next payment the 30 day notice will be sent and probably late fees will be added. If the homeowner does not contact the bank as is often the case, the next letter is at 60 days and is more serious. At 90 days the bank commences formal proceedings. Their attorney then posts out the Notice of Default notifying the borrower that they have failed to fulfill their payment obligations. It is also published in a publicly accessible publication such as the local newspaper, a fortnight to several weeks prior to the auction.
It is during this stage that the homeowner should be taking action and not suffer from the dreaded paralysis of analysis. It is also the best time for foreclosure investors to initiate some form of contact. In most cases the best option for the homeowner is to sell up and find somewhere else to live.
Whether you sell computer software or invest in foreclosure properties, any successful business owner will tell you there is always required reading. In the case of investing in foreclosure properties, the required reading is the weekly foreclosure notices.
For these types of investors the foreclosure process starts to get serious when the Notice Of Default (NOD) or the Notice of Foreclosure is posted. It is a public document and the investor needs to find where to find it. The requirements for posting foreclosure notices vary depending on where you reside. As a foreclosure investor, it is important that the investor determines the requirements in that state.
Once the Notice of Default is posted you can bet that every man and his dog foreclosure investor in their area will pick up the scent and knows about the property. The competition increases and any
investors interested in buying the property prior to auction are likely to be trying to contact the homeowners.
Hopefully you can now see the advantage of contacting the homeowner prior to the posting of the foreclosure notice. Unfortunately the only way of knowing this is by the grapevine or word of mouth.
The investor who arrives first and whom the homeowners trust the most is typically the investor who will most likely get the property.
It is not always easy contacting distressed homeowners in this pre foreclosure stage. This why many foreclosure investors prefer to wait until the official foreclosure notice is posted. Some homeowners remain in denial and may be unwilling to accept the fact that foreclosure is imminent. The posting of the NOD removes any doubt and may spur the homeowners on to take action.
What useful information does the foreclosure investor find on the Notice Of Default?
* Lists the names of the homeowners so you can personalize your approach.
* The name of the attorney or trustee in charge of the liquidation process.
* The location of the property or a legal address so that you find out the information you desire.
* The name of the bank or lender foreclosing on the property.
Every bit of research the foreclosure investor does on the property being foreclosed upon is going to assist him in putting together a deal that benefits everyone involved.
Just because a Notice Of Default is posted it does not necessarily mean that the property is going to be auctioned off. Any time prior to the sale, the homeowners can work with the lender to cancel or at least delay the foreclosure sale.
For this reason it is important for investors to watch the properties from the day the foreclosure notice is posted to the time they are sold. Sometimes an investor may find that a particular foreclosure sale is adjourned and by following the adjournments the investor can find out when the property does go up for sale. If patient the investor may be able to contest the property with less competition
Summing up, if you find out about prospective foreclosure properties prior to the posting of the foreclosure notice and if you can handle dealing with distressed homeowners during the pre foreclosure period, you have the competitive edge. The next best thing is to do your required reading and take action to contact the homeowners.
