Lets start this article by providing a brief explanation of what Foreclosure actually is before trying to explain the Foreclosure process. Foreclosure is a process that is instigated when borrowers (typically you and I) are unable to consistently pay back the required mortgage payments to the bank or organisation that lent the money in the first place. As the value of the property is used to as a guarantee against non payment of the debt, the said property is sold so that the debt can be repaid. Unfortunately for the owner, you rarely get the full market value for the house when it is sold. This is because it is priced for a quick sale, plus any would be buyer is likely to be aware that it has been subject to a foreclosure, and so won t offer as much as they might otherwise.
Foreclosure Process Itself
In most cases, the first step in the Foreclosure process is that bank will not immediately foreclose straight after the debt is owed. A period of time is granted between non payment and the actual foreclosure process. Well that is nice of them! This time period, known as pre foreclosure, does however represent a vulnerable time period for the owner as the bank could still accept offers from third parties, so all sides of the foreclosure process need to act swiftly.
The bank only gets to take ownership of the property title if the property is not sold in that pre foreclosure period. At that point, the foreclosure process really kicks in and it is highly likely that the bank will then sell the property on as they are not really interested in becoming effectively property owners, they just want to make their profits and move on. From a professional standpoint also, it does not look good leaving foreclosed properties on the banks balance sheet as it would likely be seen as leaving money on the table. The final, and most obvious reason that the bank will act quickly is that they would want to recover their debt owed. All these part of the foreclosure process add up to a quick sale for the bank, and a poor deal for the previous owner.
Foreclosure Process: Winners and Losers
As is often the case with the foreclosure process, one persons loss is another persons gain. For as bad as it is for the previous owner losing their property, it is an excellent opportunity for those in the know to snap up these types of properties for the same reason, a drop down price. As we detail in other articles on this site, banks provide foreclosure listings which can be viewed online by many websites. It is a cut throat business and money is lost and made every single day. The current sub prime mortgage crisis has drastically increased the number of foreclosures and as a result more and more people are looking to understand the foreclosure process. It really is worth taking the time to understand the foreclosure process whatever side of the fence you find yourself standing.
James Rowe writes for Foreclosure Explained and you can find more articles from him at http://www.foreclosure-explained.com/
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