What Is Considered Property in a Foreclosure?
A foreclosure occurs when a lender tries to sell their collateral in order to recover the money owed to them. The term is used most often when talking about real estate and mortgages which have failed. In these cases, the definition of property is often very important because it defines what the debtor can take and what must be left behind in possession of the lender.
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Definition
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A foreclosure in real estate typically occurs when a lender, usually a bank, makes a mortgage loan so that a buyer can purchase a house. If the buyer is no longer able to make payments, then the bank steps in and claims the property so that it can sell it and receive what money it can to make up the difference of the unpaid loan. The buyer is then forced to leave the house, and may have extra debt to pay, depending on the bank's action.
Process
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There are several stages to the foreclosure process, and their times can vary based on individual state laws and how busy the legal system and bank are in other foreclosure cases. Essentially, after the required warnings and legal declarations, the foreclosed property is auctioned off to the highest bidder. Often, no bidder steps forward and the property reverts back to the lender, who then puts the house on the market themselves. Since the bank now technically owns the property, they will evict the previous owner before trying to sell the property.
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Real Property
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A foreclosure is sold as "real property." Legally, real property refers to all the land and structures attached to that land, which the bank now owns as a result of the foreclosure. This includes any wells, anything growing on the land, sheds and tanks and plumbing units, landscaping, and of course the house itself. More importantly from a legal standpoint, it also includes all the rights to the property so that the new owner is able to use the property for various purposes within the limits of the law.
Integrated Equipment
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Integrated equipment is another very important term in the foreclosure proceedings. Real property is defined as all attached structures and "integrated equipment". Integrated equipment refers to devices that are a part of the house itself and attached to permanent structures such as plumbing and pumps, light fixtures, and related appliances. This is a vague area, and many owners who are being foreclosed on will take such fixtures anyway, regardless if they meet the "integrated equipment" standard or not.
As Is Condition
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Due to the confusion regarding integrated equipment and the sometimes irresponsible behavior of the previous owner, houses in foreclosure are not always of the highest quality, and are often in need of repairs or missing key appliances like pumps and light fixtures (refrigerators and ovens are an even more tricky area). For this reason, people looking to buy a foreclosed property must often agree to purchase the property from the bank "as is," with any damage and missing parts.
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References
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