Foreclosure Overview

What is a Foreclosure?

The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:

1.  The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.

2.  The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.

3.  A third party buys the property at a public auction at the end of the pre-foreclosure period.

4.  The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank owned or REO Properties (Real Estate Owned by the lender).

This foreclosure process allows for three opportunities for finding bargains on foreclosure homes.
 

Pre-Foreclosure:

Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.

This is where a Short Sale would occur and is also the first step for investors to buy foreclosure properties.
 

Auction:

If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

Bank-owned (REO):

If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO Homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.

Before you buy

You'll need to make sure you're armed with the foreclosure data you'll need to find and buy foreclosed homes. You can start by searching free on Google or other search engines. Enter "foreclosure listings" which includes pre-foreclosure and auction properties across the country and a nationwide bank foreclosures list. Have a real estate agent like Bob Goldman (603-781-2000) who is also a qualified foreclosure specialist, search the MLS for you.

The NH Manchester Union Leader lists auction sales in an insert every Thursday and the Portland Press Herald lists Maine auctions every Sunday. The NH Registry Review lists all NH real estate foreclosure auctions.

Timeline for Foreclosure

This information is offered by:

Although we believe that this information is accurate as it is compiled from professional sources, please verify this information on your own before relying on it as your only source of knowledge to base any decisions on.