Understanding The Foreclosure Process

Understanding The Foreclosure Process
05-19-08

In recent years a foreclosure boom has been slowly sweeping the nation. In some US cities the foreclosure rate is so high that many otherwise affluent areas have erected tent cities to accommodate those who have lost their homes to foreclosure. Many experts blame the current foreclosure boom on lenders who relaxed their guidelines in order to create more mortgages and ultimately more profit from themselves. Adjustable rate mortgages have also played a significant role in the foreclosure boom because of their steadily increasing monthly payments.

Depending upon where you live in the United States, there are different guidelines for how banks can foreclose on a property. The foreclosure process is basically divided into two distinct parts, the judicial and the non-judicial. In some states such as Georgia, for example, the non-judicial process is the formal process for foreclosure. The non-judicial process is very fast and a homeowner unable to pay their mortgage payment can lose their home in as little as thirty days from the date of default. Unless the homeowner can come up with all of the back mortgage payments, the foreclosure process can not be slowed or reversed.

In most states the formal judicial process is the norm. The formal judicial process is a very slow process and depending upon the state can easily take years for the home to be taken to auction. After the legal process has been exhausted and the homeowner is still unable to pay the mortgage, the bank has the right to auction the property off to the highest bidder. Many times the home is sold very quickly while other times the bank ends up buying the home back. A home repurchased by a lending institution is called a real estate owned property or REO.

When a property becomes an REO the bank then recruits a real estate broker to sell the home to interested buyers. Most REO's are actually listed at market value by banks so as to minimize their loss as much as possible. Within a little time after reaching the market the property will usually be discounted substantially. Once the home has been discounted by the bank, an investor can usually snap up the property for a quick profit.

Purchasing REO's is a great way to make a living as a real estate investor. But REO's have a tendency to be in disrepair when they are put up on the market. Often times this is why the bank had to buy them back in the first place. If you have little experience with property renovation, then investing in REO's may not be for you.

Mark E. Moebius
Miljonair Homes
Custom home builder St. Louis
3451 St. Albans Rd.
St. Albans, MO 63073
636.300.9000