How Foreclosure Auctions Happen

Everyone probably knows what foreclosure is all about. Sure, everyone is aware foreclosure is a lengthy process. Everyone also knows that foreclosure means a bank or lender takes possession of a person’s property who has defaulted on his or her mortgage payments. But do you know what actually happens during the foreclosure process? Do you know how the foreclosure process ends up in foreclosure auctions?

Foreclosure Auctions – Timeline

Foreclosure Auctions and Gavel

Photo Courtesy of by SarahMcGowen via Flickr

Foreclosure actually starts with pre-foreclosure phase. Once a borrower misses the first payment, the lender sends a notice to the borrower that he or she is late with the payment. If the borrower ignores the notice and misses another payment without making an effort to get in touch with the lender, the lender makes another payment request. If the borrower fails to contact the lender, the lender may now demand for the missed payment in full. Under the acceleration clause, not only is the borrower required to pay the balance of the mortgage. The borrower must also pay any late payments, legal fees and late fee penalties. The foreclosure process sets in motion once the acceleration clause is evoked.

The lender will now send a certified letter of foreclosure to the borrower which may be served by the local sheriff. A legal notice is then published by the lender in the local newspapers of the pending foreclosure. During this time, the borrower can try to work with the lender. However, unless the borrower has the full payment ready, the lender may refuse to work with them at all. A court date will then be set where anyone with financial interest in the property may attend. After the court issues the foreclosure order to the lender, the lender selects a date for the property auction in the local paper. During this time, the borrower homeowner may still try to work a settlement with the lender.

Then comes the auction date. Sometimes termed as foreclosure auction, sheriff’s sale or foreclosure sale, anyone can participate in the auction provided you have a deposit check for the stipulated minimum over the property. Contracts are issued between the auction winner and the mortgage lender after the auction is closed.

Following the auction, there is a redemption period wherein the original homeowner can opt to buy back the property. Also, the homeowner may not have to leave the house until the auction is finished and the closing has taken place. Should the original homeowner refuse to leave, the new homeowner can file evictions.

 It normally takes around six months from the pre-foreclosure phase to foreclosure auctions to closing take place.

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