Unfortunately, the answer to the question, 'how does foreclosure work,' varies from one state to the next.
Each state has its own guidelines and rules for lenders to follow when foreclosing on a home.
Although there are similarities, it is necessary to research the rules for your state in order to find out the details of how foreclosure is handled in your area.
Here are some things to check when you are researching your state's foreclosure laws.
First of all, each state has rules specifying how late the payments must be before the foreclosure process begins.
Knowing how long you have before the foreclosure process can start is helpful if you are falling behind on your payments and want to save your home from foreclosure.
All states require lenders to give owners some sort of notice before beginning the foreclosure process.
You will usually be given a certain amount of time to catch up all of your payments, including late fees, in order to reinstate the loan.
If you are unable to do so, it is extremely important to contact your lender right away to try to work out a payment plan or other arrangement.
The longer you wait, the less likely the lender is to work with you.
After the borrower has been given the required notice and has failed to catch up the payments on the loan, the lender will be able to proceed with the foreclosure process.
In some states, this involves going to court to set a date for a foreclosure auction.
In other states, the lender can set the date for the sale without a court order.
Either way, the lender will be required once again to give notice prior to the sale date.
In many areas, this is done by publishing a notice in the legal section of a local newspaper.
The lender may also be required to post the notice at the property or mail it to the owner's last known address.
Once the notice of sale has been given, the owner usually needs to pay the entire loan balance, plus fees, in order to stop the sale.
If the borrower is unable to do so, the property will be sold to the highest bidder on the sale date.
In many cases, the highest bidder will be the bank, which usually bids the amount of the outstanding debt.
If that happens, the property will become the property of the bank and the bank will be able to sell it to attempt to recover the money owed on the property.
In some states, there is a redemption period following the foreclosure sale.
If there is a redemption period, the bank must wait a certain period of time before selling the property.
During this time, the borrower has the opportunity to redeem the property and reclaim ownership by paying the full amount of the loan balance plus costs.
If the borrower fails to do so, the lender may sell the property once the redemption period has ended.
Now you have at least a general idea of how foreclosure works.
Remember to check your state's laws to get more specific details of how foreclosure works where you live.