Matthew Nguyen
J&D Triad, Realtors LLC

How Foreclosure Starts.

Any time a mortgage remains unpaid after the due date for a payment, the lender has the right to start foreclosure. (An exception is that your loan agreement or a local law may require that the lender wait until a specific grace or “forbearance” period passes.)

A foreclosure starts when the Lender (or his representative) files a legal notice with the County where your house or property is. Normally, the Lender must send you a certified letter stating that your loan is in default and telling you how much is owed in back payments and fees.

How Foreclosure Ends.

A foreclosure will end either when the loan is brought current (“reinstated”) or the house is sold at auction (Sheriff or Trustee’s sale).

Reinstatement.

Some states and some loans require the lender to “reinstate” your loan if you bring the loan current within a certain period after the start of the foreclosure. That cancels the foreclosure and your loan continues as if there had been no interruption. Most lenders will reinstate a loan up until the last day before the Sheriff or Trustee’s Sale, if they receive certified funds for the full amount of payments and fees due. 

Sheriff or Trustee’s Sale.

After the required time has passed from the filing of the foreclosure, and if the loan is still in default, a sale will be held by either the Sheriff or the Trustee. This will be an auction, normally held on the “Courthouse steps”. The minimum bid required is usually the total amount due to repay the loan, plus all payments and fees due. If the house sells for more than the amount owed, any additional proceeds must be used to pay other mortgages and liens. Anything left over will go to the foreclosed homeowner.

Eviction.

About five (5) days after the Sheriff or Trustee’s sale, an eviction often takes place. In certain circumstances, you may be able to stay longer, especially if you have genuine legal issues in question.

Balance Still Owed.

In some cases, if the foreclosure sale does not collect enough money to pay all liens and expenses, the former homeowner may still owe money on those unpaid debts.
This will vary from state to state. In some states, the law says the debt is forgiven if the loan was used for the sole purpose of purchasing the debtor’s primary residence. However, any home equity loans or refinanced mortgages would not be forgiven in this situation.

Right of Redemption.

In some states, a person who loses a property to foreclosure may have up to two (2) years to buy the property back after an eviction. Find out if this is the case in your state.

Buying bank owned properties (also known as REO properties) works a little differently from normal market sales.  Below are a few tips and some info which may make wading into the world of REO a little easier.

Making Offers

With a heavy number of properties being managed at any given time, offer response times can vary greatly depending on the client and their present number of properties. 

Disclosure

Bank owned properties are exempted from disclosure, as the seller never occupied the property and has NO history about the property.  This means that the seller cannot confirm or deny any supposed defects to the property which may be claimed by any third party, such as a neighbor.  It is recommended you complete inspections needed for your purchase as outlined in the final seller addendums and contracts and pay special attention to any timelines in this regard.

Counters and Multiple Offers

Because of the turn-around times involved in countering offers, and the significant interest in our listings, properties often may go into multiple offer situations.  As a result, it is recommended that offer counters be kept to a minimum if you wish to avoid a possible multiple offer situation.  Should the property you are offering on become subject to multiple offers, your agent will be advised on how to proceed. At this point, the seller will request "highest and best" offers from all interested parties with a deadline established.

Addendums

Addendums will usually accompany any seller acceptance package.  These addendums will often include provisions regarding closing date, lender/financing requirements and timeframes, and inspection dates.        These forms often supercede the normal North Carolina contracts your realtor may use in your offer.  It is important that your agent be familiar with the requirements contained in those addendums, as the seller will hold any buyer to the terms of these forms.  One source of contention often involved in this regard involves earnest money.  Seller requirements regarding inspections, financing approval and closing dates must be held to, or the seller may either cancel the contract, earnest money may become non-refundable or per diem penalties may be applied.   Make certain that your lender is aware up-front of any financing contingency dates.

Closing Requirements

Many bank clients have addendums which require the buyer use their closing agent (attorney) or title company.  If this is the case, this is not optional and any changes to the seller's contract forms will void your offer.  Don't worry - You won't have to travel for closing.  If the seller's closing attorney is not local they may provide a traveling "closer" to come to your agent's office or may provide a "mail-away" closing.  Refer any questions regarding title insurance or title searches to your agent.