Armando Montelongo | News and Information In Real Estate

The foreclosure laws and process may strike fear in people are new to homeowners, but it can provide opportunities to educated investors.

If you know what you’re doing, you can buy a foreclosed house at a great price and sell it at a good profit.

Foreclosure Laws

Foreclosure laws vary by state, so it’s important to know the process where you live.

Start with this list, do your research and go for it.

Typically mortgage companies will start the foreclosure process around 3 to 6 months after the first missed payment. However most companies understand that sometimes the borrower may be going through financial difficulties.

The U.S. Department of Housing and Urban Development explains the foreclosure process and lays out the 3 types of foreclosures as follows:

Judicial Foreclosure

All states allow this type of foreclosure, and some require it. The lender files suit with the judicial system, and the borrower will receive a note in the mail demanding payment. The borrower then has only 30 days to respond with a payment in order to avoid foreclosure. If a payment is not made after a certain time period, the mortgage property is then sold through an auction to the highest bidder, carried out by a local court or sheriff’s office.

Power of Sale

This type of foreclosure, also known as statutory foreclosure, is allowed by many states if the mortgage includes a power of sale clause. After a homeowner has defaulted on mortgage payments, the lender sends out notices demanding payments. Once an established waiting period has passed, the mortgage company, rather than local courts or sheriff’s office, carries out a public auction. Non-judicial foreclosure auctions are often more expedient, though they may be subject to judicial review to ensure the legality of the proceedings.

Strict Foreclosure

A small number of states allow this type of foreclosure. In strict foreclosure proceedings, the lender files a lawsuit on the homeowner that has defaulted. If the borrower cannot pay the mortgage within a specific timeline ordered by the court, the property goes directly back to the mortgage holder. Generally, strict foreclosures take place only when the debt amount is greater than the value of the property.

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