The Foreclosure Process

The first stage in a foreclosure process is the short sale pre-foreclosure stage.  In some states, it is called the Notice of Default and in others, it is called Lis Pendis.  A bank can file a foreclosure lawsuit when the borrower becomes 3 payments behind on their mortgage.

During this period, the borrower has a few options to solve their situation:

  • They can pay off the lender in full
  • Bring the loan current by paying all the past due amounts
  • They can do a loan workout with the lender by negotiating the repayment plan, loan modification.
  • Sell the home and move
  • Sell the home to an investor and lease it back
  • Refinance the home with an equity lender
  • If they owe more than the home is worth, they can do a short sale with the lender.  This stage only occurs in judicial states and does not happen in non-judicial states.

The 2nd state is the foreclosrue process is the Auction or Trustee Sale

  • The bank will sell the property to public auction
  • The sale date is set by hearing 3 to 4 weeks before actual auction occurs
  • The homeowner has the right to attend the hearing and request an extension to get the home sold.
  • 95% of the homes that go up as auction, go back to the bank as an REO (Real Estate Owned)

The 3rd stage of foreclosrue process is the REO stage:

  • This can cost a bank anywhere from 35,000 to 50,000 to take a home back in foreclosure.  This is the last process of the foreclosure process in a judicial state.  The property becomes an REO if the property does not sell to a 3rd party bidder at the auction.


Short Sale