Foreclosure Education - Buying Foreclosures

A Foreclosure is a process or real estate transaction that enables a lender to recover the amount owed on a loan that has been defaulted (not paid) by selling or taking ownership (repossessing) of the property securing the loan. The process starts when a borrower/homeowner defaults on a mortgage loan payment and the lender files a public default notice, typically referred to as a Notice of Default. The Tucson Foreclosure process usually concludes in one of four ways:

1. The Borrower/Homeowner reinstates his/her loan by paying the default amount during some type of a grace period determined by Nevada law. This period in time is also commonly referred to as a pre-foreclosure.

2. The lender can take ownership of the property (after it is in foreclosure), with the intention to resell the property on the open market. The lender can take ownership of the property typically via an agreement with the Borrower/Homeowner during a pre-foreclosure period usually referred to as a “short sale foreclosure.” Note: a property repossessed by the lender is usually referred to as a REO Property (Real Estate Owned by the lender).

3. The borrower/owner sells the property on their own to a third party during a pre-foreclosure process – enabling the Borrower/Homeowner to pay off the loan amount and avoid getting a foreclosure on his/her credit history.

4. A third party buys the property that has been foreclosed at a public auction held at the end of the pre-foreclosure period.

Pre Foreclosure Transactions

Buying a piece of property or home in pre-foreclosure involves contacting the Borrower/Homeowner directly and offering to buy the property outright - enabling the Borrow/Homeowner to walk away with a financial return on any equity in the property and avoid a negative mark on their credit history. The buyer usually has time to research the title and condition of the property and can realize a significant discount below market value.

Tucson Bank Owned REO

If the lender takes possession of the property via an agreement with the owner during pre-foreclosure or at a public auction the lender will want to resell the property to generate sufficient payment to cover the unpaid loan amount. The lender will in most cases also clear the title and perform some basic maintenance and repair, depending on other market variables.

Government Foreclosures

A Government Foreclosure can occur if the loan is backed by a government agency; this is in most cases HUD (Department of Housing and Urban Development) or the VA (Department of Veterans Affairs – if this occurs the government agency would be responsible for selling the property.

 Foreclosure Auction

If a loan is not reinstated at the conclusion of a pre-foreclosure timeframe, prospective buyers can bid on the property via a public auction. But, buyers are frequently required to pay in all cash at the auction and may not have a great deal of time to research or “clear” the title and ascertain the condition of the property.