Understanding Real Estate And Home Foreclosures By Real Estate Pros At Isnare.com Ezine Articles

Foreclosure is a process by which a person borrows money to buy and home, condo or townhouse, but is unable to maintain the payments on the borrowed money. For example, if a person takes a $300,000 loan to purchase a property, most often they will repay this money in monthly installments. If they are unable to pay the monthly installments, the lender (usually a bank), will take steps to regain ownership interests in the property – a process known as foreclosure.

With the boom in home ownership over the past few years, some people purchased homes that they really could not afford. Other purchased homes they could afford at the time, but now their financial situation has changed to the point where they can no longer afford the payments on the home. In either case, if people get behind on payments, the lender will likely initiate the foreclosure process.

The process of foreclosures varies by state but generally follows these steps.

1.Lender sends Notice of Default (NOD) letter to borrower.

2.Lender specifies timeline during which borrower must get caught up on payments and late fees.

3.If borrower unable to get caught up on payments, lender files documents with relevant authorities so that the house can be sold to the highest bidder.

4.The house is sold and the lender recoups the loan amount and late fees from sale proceeds.

5.If property does not sale, the lender becomes the owner of the property (known as Real Estate Owned by Bank or REO).

So what can a person do if they are behind on their payments? Here are some possibilities:

1.Talk to your lender to see if you can work out alternative payment terms that will help you avoid foreclosure.

2.Quickly place your home for sale and hope that it sells quickly. This option is less likely to work in a slow market. However, if you are able to sell your home, this will allow you to payoff the lender from the proceeds of the home sale (assuming that the sales price and your equity exceeds the loan amount).

3.If you have sufficient equity, you may be able to refinance the property and take cash out to get caught up on the payments.

4.Borrower voluntarily agrees to return their ownership interest in the home to the lender, and the lender agrees to forgive any remaining debt. This option, also known as a short sale, is only possible when the buyer and lender agree to this type of arrangement. Borrowers should discuss how this arrangement will impact their credit rating.

5.Borrower files bankruptcy. Bankruptcy laws are very complex, so borrowers should consult qualified professionals to fully understand the implications of bankruptcy on a home foreclosure before making any decisions.

The summary above should give you a general idea about real estate foreclosures. You should know that the process of foreclosure varies by state, and in some jurisdictions, the borrower has the right of redemption after foreclosure. Be sure to consult qualified professionals before making any decisions about buying or selling a property in default or foreclosure.

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