The beginner's guide to the foreclosure process


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The beginner's guide to the foreclosure process

  1. 1. | Foreclosure Deals | The Beginner’s Guide to the Foreclosure Process Contents Introduction……………………… 1 Judicial vs. Non-Judicial Foreclosure ……………………….2 Judicial Foreclosure Process……………………………… 2 Non-Judicial Foreclosure Process …………………………….3 Glossary/Contact info………..4 Foreclosure properties can be an inexpensive source for that new family home or investment property, but for first-timers the process can be daunting. Buying foreclosures is different from buying other kinds of real estate, so there are a lot of new things to learn. In this guide, we’ll be going over the basics of the foreclosure process. [Volume 1, Issue 1]
  2. 2. Judicial vs. Non-Judicial Foreclosure In the judicial foreclosure process: 2 A judicial foreclosure requires court approval. This is common in states where a mortgage between the homeowner and lender is the norm for financing. A non-judicial foreclosure doesn’t require court approval. This is common in states where deeds of trust with a third party, or trustee, are used more than mortgages. Some states allow for both kinds of foreclosures.  The lender hires an attorney to file a lawsuit against the homeowner once all other methods of receiving payment on the default have been exhausted.  In conjunction with the lawsuit, a lis pendens (LIS) is filed with the county. This notifies the public that a lawsuit has been filed against the homeowner to collect the default, which may include foreclosing on the property.  It is the burden of the lender to prove that the homeowner has defaulted on their mortgage. If the lender is able to sufficiently prove their case, the judge will sign a Notice of Foreclosure Sale (NFS), giving permission for a trustee to sell the foreclosed property at auction.  Depending on the state, court approval may be required for a foreclosure sale to be confirmed. If this is the case, the buyer will usually be required to prove their ability to pay for the foreclosed property in order for the sale to be approved. If the buyer is not paying entirely in cash, they should bring mortgage documents and/or any other proof that they have secured financing.
  3. 3. In the non-judicial foreclosure process: 2  The lender issues a Declaration of Default to the trustee, which authorizes them to file a Notice of Default (NOD) to the homeowner. This alerts them that they have defaulted on their loan. The homeowner is given time to pay back their debt prior to the sale or arrange a short sale if they do not have the money to pay the default.  If no arrangement is made to pay back the loan, the lender will issue the trustee a Publication Letter. This signals the start of the Publication Period, where the trustee is authorized to file a Notice of Trustee Sale (NTS) to alert the public of the foreclosure auction. The publication period ends when the property is sold.  The homeowner has between the date the NOD was issued to up to five days before the auction sale to pay back the debt. This is known as the Reinstatement Period.  If the homeowner is able to pay back the loan prior to the sale, the trustee issues a Recession of Notice of Default signed by the lender. This removes the burden of the NOD. What’s does that mean? For more terms and definitions, check out’s glossary page: lossary.php
  4. 4. Foreclosure Glossary 2 A foreclosure is the process in which a property that has been defaulted on by the owner is sold off to satisfy the debt. There are several ways in which foreclosed homes can be sold:  Public Auction: This is the most common type of foreclosure sale. Depending on state law (see below), a Notice of Default (NOD) or Lis Pendens (LIS) is issued to begin the process. This is later followed by a notice of sale.  Real Estate Owned (REO): An REO usually occurs when a foreclosure fails to sell at auction. This is when the lender that provided the mortgage loan gains ownership of the property. If the lender is a large bank with an established REO department, they may sell these properties themselves. Otherwise, they may pass them onto real estate brokers or other third party sellers.  Government Owned (GOV): GOVs are foreclosed houses sold by government agencies, such as HUD or VA. This occurs when a home purchased with a federally issued loan, such as the VA Vendee Financing Program, goes into foreclosure. You do not have to be a veteran or associated with a government agency to purchase a GOV foreclosure.  Short Sale: Also known as a pre-foreclosure, a short sale actually prevents a home from going into foreclosure. After receiving an NOD or LIS, the homeowner can try to arrange an agreement with the lender to sell their home for less than it is worth to pay off their debt. The lender receives what they’re owed, and the homeowner prevents a foreclosure on their credit. Foreclosure Deals 12550 Biscayne Blvd, Suite 306 Miami, FL 33181 FAX: 1-347-402-6620 If it’s not a deal, we won’t list it here! Find us on the Web: Now that you know the foreclosure basics and the different types of foreclosure processes, you can start searching for a foreclosure of your own. You can read more helpful guides like this one in the Learning Center at