What Happens to Property After it Has Been Foreclosed On?
Foreclosure laws vary by state. Anyone facing a foreclosure needs to research the laws in his state or to contact a qualified attorney for information. Although banks generally follow the same steps when a borrower misses three or four payments, the timeline of the foreclosure process may be slightly different in each state.
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Before the Foreclosure
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The foreclosure process can start as soon as the borrower misses one payment. However, it rarely happens. Most banks give borrowers a grace period of a couple of weeks to make the late payment. Late fees will usually go in effect 15 days after the due date. After three missed payments, the lender usually sends a "Demand Letter" or "Notice to Accelerate" and warns the homeowner about the possibility of foreclosure. At this time, the borrower has about 30 days to bring the mortgage current. This is the time to make arrangements with the lender, especially if the borrower does not have the full amount to pay but wants to avoid the foreclosure.
Judicial Sale and Power of Sale
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The sale of the home can happen through a judicial sale, also known as sheriff's sale, or through power of sale, also known as a public Ttustee sale. Only 29 states allow power of sale, a faster option than the judicial sale. Before the sale can be scheduled, the lender must start the foreclosure process by filing a suit with the court system if the borrower does respond with a payment and makes no arrangements by the end of the 30-day period. Once the court grants a permission, the attorney schedules a sale with the local sheriff's office or appoints a public trustee to sell the home by auction. Power of sale or the public trustee sale is quicker because it often bypasses the court system. A lender-appointed trustee sells the property at an auction after the 30-day grace period ends. These foreclosures may also go through a court review to ensure that the foreclosure process was carried out legally.
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After the Sale
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The sheriff's sale or the public trustee sale is the actual date of foreclosure. Before the sale, the borrower can still make a payment to bring the mortgage current or to make arrangements and to avoid the sale. In most cases, the bank buys the property at the auction. Many lenders give the borrower another chance to pay the amount of the loan plus the attorney's fees and any other costs incurred by the lender during the foreclosure process. Even after the sale, the borrower can reclaim the property by paying the stated amount. If the borrower doesn't pay, the lender is likely to sell it through the real estate market.
Considerations
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If you are facing a foreclosure, consider speaking to a qualified attorney to understand your rights and the exact foreclosure process and timeline that takes place in your state. A housing counselor may also help and guide you through the process. Foreclosure information can be found on the website of the U.S. Department of Housing and Urban Development.
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