The term foreclosure is one which may seem ominous to many individuals, especially if they have never experienced one and/or are unfamiliar with real estate terms. A foreclosure occurs when a homeowner can no longer pay their mortgage, and their loan goes into default and the bank repossesses the home. There are certain things which all individuals should know about bank foreclosures so that they can be more familiar with the term and prevent this from happening to them.
What the Lender Gains from Foreclosures
A lender profits in various ways from foreclosing on a defaulted borrower's home. First, by repossessing the home, the lender is puts a stop to any future loss that would have occurred as a result of the homeowner's nonpayment from that point forward. Next, the lender can sell the home to try and mitigate its losses (i.e. loan balance, attorney's fees, court costs etc.).
Condition of Title in the Home
When an individual purchases a home in a foreclosure sale, the prospective buyer wants to ensure that the title to the home is good and that there will not be any issue with such a thing should they purchase the home. A good tip to keep in mind is that lenders will generally always bid on a home at a foreclosure auction if they know the title is good. Lenders often bid on foreclosure homes at Sheriff's sales in order to obtain the property and sell it for a greater amount down the road. If there is an issue with the title, they will be less likely to do so.
How Lenders Dispose of Foreclosure Properties
There are a variety of ways in which lenders dispose of foreclosed properties. Some lenders advertise foreclosure sales in newspapers while others retain real estate agencies to advertise the properties for them. The lender wants to choose the most effective yet least timely manner when it comes to disposing of foreclosed properties. Many of the larger lenders have a department within their financial institution which deals exclusively with handling sales of this type.
How to Avoid Foreclosure When You’re in Default
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Disclaimer: This article is meant for reference only, and is not intended to be legal advice.
For legal counsel regarding your situation, please consult an attorney licensed in your state.