EP201: Back to Basics: What Is a Foreclosure?
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About a decade ago, foreclosures were common in the world of real estate. Now, foreclosures are much less common, but as a real estate investor, you should be informed about foreclosures and how they work.
On this episode of Investing in Real Estate, I’ll walk you through the five-step foreclosure process. You’ll learn about liens, public notices, collateral, and more. You’ll also come to understand the agreement between the borrower and the bank, and how it changes in the event of a foreclosure.
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A foreclosure occurs when the borrower fails to make regular payments on their mortgage. When a mortgage is constructed, the bank places a lien on the property. This means the loan is secured, and in the event that the loan is unpaid, the bank has the rights to the property.
The process can vary depending by state law, but typically the foreclosure process begins with missed payments. When the borrower stops making their regular monthly payment, the bank takes action. Then, the lender records a public notice. This notice indicates that the borrower defaulted on the loan.
Next, the home goes into pre-foreclosure. This is a grace period that allows the borrower to work out an arrangement. Typically the bank would rather collect some of the payment than none. The next step is an auction.
If a third party does not purchase the home in an auction, it goes into post foreclosure. Then, the bank takes ownership of the property. On today’s show, I’ll go deeper into the foreclosure process. I’ll walk you through the whole process, including examples. Don’t miss this episode of Investing in Real Estate!
If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.
On this episode you’ll learn:
- When does the public notice occur?
- What is an unsecured loan?
- How long is the pre-foreclosure grace period?
- How does lien positioning work?
- And much more!
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