Create a Comfortable Future for Your Family in a Bank-owned Home Purchase

The foreclosure routine differs from state to state because of varying laws, but there are multiple unifying aspects. In basic terms, a foreclosure happens when a mortgage firm seizes a property from its owner because they are no longer making payments toward the loan. There are multiple steps to this process. The first step is a notice of default, which is typically filed with the county recorder's office about three to six months after the borrower has stopped fulfilling their financial obligation.

Once a notice of default is filed, the property owner has a length of time to have the loan restored by negotiating with the mortgage company on terms to catch up on the loan or to renegotiate the terms of the loan. If the borrower is unable or does not agree to terms to get the loan current, a notice of sale is issued that gives a date for the property to be put up for auction.

Once a notice of auction is issued, the bank intends to carry through on its right to repossess the property for the reason of nonpayment. Normally, an auction takes place to sell the home for the maximum price. At the auction, the mortgage company will set an opening bid, or reserve, which generally amounts to the remainder of the loan and unpaid interest and any other fees associated with the process, such as legal fees. If no bids meet the reserve price, the lender will buy the home, making the property bank-owned or real estate-owned. The lender often buys homes sold at auction because the home is valued at less than what is owed to the lender. When you buy a bank-owned home, it generally comes with a clean title. However, in the majority of instances the buyer assumes liability for property taxes.

A home in foreclosure can be bought outside of the auction process. Interested buyers are able to contact the owner and endeavor to bargain for a short sale, which is a scenario where the lender agrees to sell the home for less than is due on the loan. A short sale is characteristically more complex than a traditional transaction, but buyers can find some good deals if they are prepared to work with the seller and their mortgage company to bargain for a deal.

The initial step in a short sale is to come to an agreement on price with the seller. Once that is through, the buyer will have to make contact with the loss-mitigation department of the bank that owns the mortgage on the property. The loss-mitigation representative will be the person who can consent to the short sale and inform you to what information is needed before an agreement can be reached.

Because a short sale can be involved, it is important to retain the services of an experienced real estate attorney who can represent you during the process. Buyers should also be alerted that homes purchased in a short sale are sold as found.