Sunny Isles Real Estate - Foreclosures
What is Foreclosure?
Foreclosure is a process that allows a lender to recover the amount owed on
a defaulted loan by selling or taking ownership (repossession) of the
property securing the loan. The foreclosure process begins when a
borrower/owner defaults on loan payments (usually mortgage payments) and the
lender files a public default notice, called a Notice of Default or Lis
Pendens. The foreclosure process can end one of four ways:
- 1. The borrower/owner reinstates the loan by paying off the default
amount during a grace period determined by state law. This grace period
is also known as pre-foreclosure.
- 2. The borrower/owner sells the property to a third party during the
pre-foreclosure period. The sale allows the borrower/owner to pay off
the loan and avoid having a foreclosure on his or her credit history.
- 3. A third party buys the property at a public auction at the end of the
pre-foreclosure period.
- 4. The lender takes ownership of the property, usually with the intent
to re-sell it on the open market. The lender can take ownership either
through an agreement with the borrower/owner during pre-foreclosure or
by buying back the property at the public auction. These properties are
also known as bank-owned or REO properties (Real Estate Owned by the
lender).
Foreclosure Opportunities
Pre-Foreclosure
Buying a property in pre-foreclosure involves approaching the borrower/owner
and offering to buy the property outright. The borrower/owner can walk away
with the equity in the property and avoid a bad mark on his or her credit
history. The buyer has time to research the title and condition of the
property and can realize discounts of 20-40 percent below market value.
Next Step: Public Auction
If the loan is not reinstated by the end of the pre-foreclosure period,
potential buyers can bid on the property at a public auction. Buyers often
are required to pay in cash at the auction and may not have much time to
research the title and condition of the property beforehand; however, a
public auction often offers some of the best bargains and avoids the
unpredictability of dealing directly with the borrower/owner.
Next Step: Bank-Owned (a.k.a. REO)
If the lender takes ownership of the property, either through an agreement
with the owner during pre-foreclosure or at the public auction, the lender
will usually re-sell the property to recover the unpaid loan amount. The
lender will typically clear the title and perform needed maintenance and
repair; however, the discount for these REO homes is typically less than a
pre-foreclosure or auction property discount. Bank foreclosures can become
government foreclosures if the loan is backed by a government agency such as
the Department of Housing and Urban Development (HUD) or the Department of
Veterans Affairs (VA). In that case the government agency would be
responsible for selling the property.
To learn more about foreclosures in the Sunny Isles area, contact
Priority Properties Today!
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