Home foreclosures opportunities

Types of Foreclosures

HUD foreclosures, government foreclosures

A foreclosure is the process by which a bank or lender repossess real property after the borrower defaults on the agreed payment arrangements. The reason that creditors are able to take possession of a home is due to the fact that mortgages are considered secured loans. In the case that a borrower is unable to make payments, the home can be sold so that the lender is able to recover the value of the loan that was issued.

There are two primary types of foreclosures.

1. Foreclosure by judicial sale
2. Foreclosure by power of sale.

Foreclosure by judicial sale involves the court-supervised sale of the property. A court-appointed official will be in charge auctioning off the home. Although there is an established minimum bid that must be accepted before the house is sold, most homes are purchased for less than the property’s current value. The funds received from the sale of the property are used first to pay off and primary liens, court cost, and legal costs. The money that is left over goes to the lender to cover the cost of the mortgage loan. In the case that there are remaining funds once the lender is paid, this money goes to the previous owner of the property. The reality is that this seldom occurs. In fact, more often then not, the funds raised from the sale of the home are not sufficient to cover the cost of the mortgage. If this is the case, then the creditor will continue to have the right to collect on the amount still due along with interest and any additional fees.

Foreclosure by power of sale gives the home owner the opportunity to sell the house on his or her own. Typically, this is a better option for the homeowner as he or she normally able to sell the home for a much better price then what is paid in the auction. As is the case with the foreclosure by judicial sale, the money paid for the home will first go to paying off any liens or legal fees, and then will go to paying off the lender. If any money is left over after all debts are paid, then this money will go to the previous owner.

The foreclosure process is a rather quick process that can take as little as 3-4 months to complete. The first step in avoiding a foreclosure is to speak with your lender. Often times, they will be willing to arrange a special payment plan to help you recover. They may be willing to lower your monthly payments or give you some extra time to catch up on missed payments. These arrangements can help you if your financial situation is a temporary issue; however, if your economic outlook does not appear to have the chance to improve.

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