What are the Stages of the Foreclosure Process?

The first stage in the foreclosure process is Preforeclosure  

This is when the bank files the foreclosure lawsuit. In some states, its called the Notice of Default and in other states, its called a Lis Pendis. The bank can file the foreclosure lawsuit when the borrower becomes 3 payments behind.

During this period, the borrower has options to solve their situation:

- They can pay off the lender in full. 

- They can bring the loan current for all of the past due payments and attorneys fees due.

- They can do a workout with the lender to negotiate a repayment plan, loan modification of forbearance.

- They can sell the house and move

- They can sell the house to an investor and lease it back

- They can refinance the home with an equity lender.

- If they owe more than the home will sell for, they can do a short sale with the lender.  This stage only occurs in a judicial state, It does not occur in a non-judicial state.

The 2nd Stage in the foreclosure process is the Auction or Trustee Sale

- This is where the bank brings the property to public auction.

- The sale date is set by a hearing 3-4 weeks before the actual auction occurs.

- The homeowner has the right to attend the hearing and request an extension to get the home sold. Most of the homeowners we work with that attend this hearing can buy themselves an additional 3 days for a total of 60 days.

- 95% of the homes that go to auction go back to the bank as an REO.

The 3rd stage in the foreclosure process is the REO stage

- REO stands for Real Estate Owned. This usually costs the bank anywhere from 35,000 -50,000 to take a home back in foreclosure. This is the 3rd and last stage of the foreclosure process in a judicial state. The property becomes an REO if the property does not sell to a third party bidder at the auction.

Stay Tuned for the Next Tip to find out what the most profitable stage of the foreclosure process is for investors.

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Submit a comment below to let us know what stage of the process you prefer to focus on.

D.C. Fawcett