THINGS TO REMEMBER ABOUT FORECLOSED PROPERTIES
Foreclosure is a legal proceeding in which a lender obtains a court ordered termination of the borrower’s equitable right of redemption. At the time the home is purchased the lender obtains from the borrower a security interest in the house to secure the loan (note). The security for the note is an agreement between the lender and borrower usually called a deed of trust. If the borrower fails to make payments to the lender, he has broken the agreement and is in default. The lender can then foreclose on the property.
The foreclosure process as applied in this case is the lender repossessing and eventually selling the property in order to get back some or all of the money loaned to the borrower. The time frame to accomplish this varies from state to state. It would be wise to consult an attorney if you know you will be unable to make your house payments.
If you are considering purchasing a foreclosed property, there are some cautions:
- Before bidding on a property, make sure you know which deed of trust is being foreclosed on. Is it the first deed of trust or the second deed of trust? Do your homework.
- The IRS has a 120 day redemption period so watch for federal tax liens.
- Things can change right up to the time of sale such as the borrower filing for bankruptcy.
- Assessments such as water, utilities, and sewer stay attached to the property after foreclosure. You will be responsible as the owner for any delinquencies.
- Unpaid property taxes are not included. Make sure these get paid.
- If you purchase a junior lien, you are taking it subject to the senior lien. The lender for the senior deed of trust does not have to accept a pay off from you and can turn around and foreclose on you.
It would be important to consult with a real estate agent and a local title company if you are going to pursue these foreclosed properties. There are some great deals right now and interest rates remain extremely low.