Commercial Foreclosures
Foreclosure is a process that allows a lender to recover from a defaulted loan by selling or repossession of the property securing the loan. The foreclosure process begins when a borrower defaults on their mortgage payments. The lender files a public notice, called a Notice of Default. The following could happen after the NOD has been filed:
1. In the pre-foreclosure period, the borrower could re-instate the loan by paying off the defaulted amount. Every state has a different grace period to allow this to happen.
2. The property could be sold, and the loan would be paid off. If there is a balance due, this would be up to the creditor to forgive the borrower, or persue them legally. Currently the laws allow loans to be forgiven under certain conditions.
3. If the property is not purchased at the auction, then the lender takes ownership of the property, usually with the intent to re-sell it on the open market. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).
This allows for opportunities to find properties greatly under market value.
Buying a property in pre-foreclosure means approaching the homeowner (the borrower) and offering to buy the property from them. The property owner can walk away with possibly with equity and avoid a foreclosure on their credit.
If the loan has not been reinstated by the end of the pre-foreclosure period, the property is put up for auction usually at the local county courthouse. Buying at an auction can be quite tricky and a good understanding of the aution process should be had, before attempting such.
If the lender takes back ownership of the property at the public auction or through deed-in-lieu of foreclosure which would be during the pre-foreclosure period, the property is then known as bank owned, or REO (Real Estate Owned). The lender will want to re-sell the property to recover the unpaid loan and the potential to get a bargain for these homes, is great.
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