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What Happens In a Foreclosure?

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By : John Cutts    99 or more times read
Foreclosure can be a tricky process to navigate, especially because the rules and laws guiding their procedure can change drastically from state to state. But the do all follow a general pattern that's very important to understand, whether you're facing a foreclosure yourself or looking to buy them at auction.

It all begins after a homeowner defaults on payments of their monthly mortgage. In order to collect the unpaid debt on the mortgage loan, the lender will begin the process of foreclosure, which ultimately allows them to sell the property under mortgage at auction to retrieve the funds lost on the unpaid loan.

Depending on whether local laws call for judicial or nonjudicial foreclosures, the lender may then have to open a court case over the foreclosure. This will allow them to state their case legally to a court and set a date for a foreclosure sale of the property. The homeowner has until the day of the foreclosure sale to halt the sale, and they can do so either by paying off their default debt or the entire value of the loan, depending on state custom. If the state allows nonjudicial foreclosures, then the the lender can simply schedule a foreclosure sale date on their own.

If the homeowner cannot raise the money necessary to halt the sale, then the foreclosure auction takes place as scheduled. It is usually held in a public venue, and anyone may place a bid. Once the winning bidder is established, they must put down a portion of their bid immediately, and make plans for payment with the sale trustee at a later date.

The foreclosed homeowner is still entitled to a period of redemption after the sale completes. During this time, if they can pay the full value of the winning bid, plus any late fees or costs associated with the sale, they can regain ownership of their home. However, the time for redemption period varies, and isn't always very long.

The best thing to do before getting started trying to stop a foreclosure or buy a foreclosure is to look into your specific local laws regarding foreclosure sales, so you know exactly what you're getting into.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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