When does the bank officially take ownership of a foreclosed property

The foreclosure process is an unfortunate reality for many homeowners. When an individual is unable to remain current with their mortgage payments, their lender – typically a bank – has the right to foreclose on the property and force the mortgage holder out. Once the property has been foreclosed on, the most common next step is for the bank to try and sell the property via auction. In the event that it is unable to do so, the bank itself will typically purchase the property in question. That being said, bank-owned homes can still be purchased by future owners. Understanding how this process works to buy back a foreclosed home, as well as the specific details surrounding the transfer of ownership to the bank, is valuable knowledge for future home buyers.

Tips

• If a bank chooses to buy a foreclosure property, they will likely re-list it for sale on the open market. This is accomplished through the assistance of a real estate agent.

Exploring the Foreclosure Process

Depending upon the specific details concerning the mortgage lender and the borrower, initiating a foreclosure will likely not occur until the homeowner is more than three months behind on their payments. In the event that the mortgage lender does decide to initiate foreclosure proceedings, they will first need to ensure that the current tenants no longer live in the property. This is accomplished through the eviction process. Once the house has been vacated, the bank will likely try to clean up the property as needed in order to ensure that it will appear as an attractive purchase during the auction process.

Understanding Foreclosure Auctions

Foreclosure auctions are popular platforms for selling homes at discount prices. In the event that a foreclosed property is not successfully sold at auction, the bank acting as the mortgage lender will purchase the home. At this point, the bank will likely attempt to sell the property as soon as they are able in order to salvage whatever they can in terms of value.

Much like any other individual choosing to sell a property, a bank will list their foreclosed home using a real estate agent. Given the fact that it is in the best interest of the bank to sell the property as quickly as possible, the price of the foreclosed home will often be significantly lower than the actual market value. Again, it is important to note that the bank has no vested interest in keeping the property. Selling the home for the best price possible is the intended objective following a failed foreclosure auction.

Buying Back a Foreclosed Home

Once the home has been re-listed for sale, the bank may have a variety of options available with respect to recouping lost funds from the original homeowner. Once the property is sold, the bank will subtract the total value of the sale from the loan balance of the original borrower. In the event that the sale does not cover the remainder of the loan, the bank may be legally entitled to sue the previous homeowner for the remaining funds. If you have been asking, "Will I owe money after foreclosure?" then understanding these legal statutes is critical.

Whether or not the bank chooses to pursue this action is their decision. However, it is important to observe that the homeowners who chose to stop making payments earlier may be required to do so by law at a point in the future.

In some situations, a very attractive home may arrive at a foreclosure auction and fetch a price remarkably close to its fair market value. Regardless of the specific outcomes, however, it is important to remember that the bank responsible for the mortgage will continue to try and sell the property to a new, qualified owner throughout the foreclosure process as a whole. More information about this process can be found on the websites of major mortgage lenders across the country.

Buying a Foreclosed Property in Florida

When it comes to buying a foreclosed property in Florida, it helps to know the stages of the foreclosure process. While you can purchase the property at any point during the foreclosure, you should know from the outset that the process is much different and often times more time consuming than purchasing a property from an owner who is not experiencing financial distress.

READ: 10 TIPS TO KEEP IN MIND WHEN BUYING YOUR FIRST HOME

The Foreclosure Process

If a property owner has failed to pay their mortgage for several months, a bank or mortgage company has the right to accelerate the loan and force the sale of the property to satisfy the debt. Because the lender is looking to recoup its loss, these homes typically go on the market at a lower price than surrounding properties. This is what makes this real estate so attractive to investors and prospective homeowners.

Judicial Foreclosure

In Florida, the method of foreclosure is through the judicial process, meaning the lender must file a lawsuit in state court. Depending on the size of the court docker, it can take anywhere from 180 to 200 days to force an uncontested foreclosure, and it can take even longer if the borrower contests the action.  Like any lawsuit, there are court filings, summons, preliminary hearings, and more that can slow down the process even further. If, during this time, the borrower files bankruptcy, that can also extend the process. Once a summary judgement has been entered, however, a foreclosure sale date will typically be scheduled within 30-60 days. This sale date is when the public auction of the property occurs.

Bank Owned or Real Estate Owned Foreclosure Properties

Bank-owned or real estate-owned (REO) properties are actually foreclosure properties that fail to sell to a third-party at the judicial auction. There are any number of reasons why a property might not sell at auction, including bids failing to cover the foreclosure judgment. Once a bank officially takes title to the property, it is considered an REO. Once this happens, the bank typically hires a real estate agent to sell the property.

Tips to Buying During the Pre-Foreclosure Process

• Contact the homeowner or seller’s representative. While it may be uncomfortable, contacting the homeowner directly is perhaps the best way to truly grasp the condition of the property and perhaps get an idea of what is owed on it. If you have a real estate agent you’re working with, they can make contact with the borrower or their representative on your behalf. If the property is listed, contacting the homeowner’s listing agent can expedite the process and perhaps result in a discounted price to effectuate a quick sale.
• Inspect the property. If the homeowner and/or the homeowner’s real estate agent is inclined to listen and entertain your interest (which is no guarantee), try to set up a time to visit where you can thoroughly view and inspect the property. If they’re motivated to sell and it’s early enough in the pre-foreclosure process, the homeowner will likely allow you to schedule an independent inspector to come and take a look at the property.
• Have financing in place. If you contact the homeowner early enough in the process, you might be able to make an offer that appeals to them. Before making an offer, however, be sure to have financing arranged and be ready to close quickly. This means you may have to forego repairs made by the seller. If the offer is accepted, contact a real estate attorney right away—they can help you close the deal quickly and with as little complication as possible.

Buying a Foreclosed Property at Auction

In Florida, when real estate is sold at public auction, by law the foreclosure auction must be advertised to the public. The date, time, and place should be included in the advertisement and the notice shall appear in certain types of publications. The property will then be auctioned to the highest bidder, which, in Florida, can include the lender.

While the foreclosure auction is an exciting prospect, remember that as the winning bidder, you will bear all the risk. This means that you’ll need to be able to pay cash for the property at the time of sale, and you’ll be on the hook for anything that goes wrong with the title, taxes, or insurance. If all goes well, you’ll own the property, but remember—you’ll own it AS-IS, meaning any deteriorating conditions and/or damage to the property are all yours without any recourse or compensation. You also may be responsible for any superior mortgages and/or the liens or rights of any association, as well as for any tenants or people living on, at, or in the property.

Buying An Reo Property

Banks can be a bit more difficult to deal with than homeowners because you can’t deal directly with them (only through a Realtor®) and they’re interested in getting as much back for the properties as possible. There are two main agenda items to cross off your list before you even start shopping for an REO property.

1. Hire a real estate attorney. Many lenders will hire “title mills” to handle the closings of their REO properties on a bulk basis. The goal of these title companies is to close these REO transactions as quickly and efficiently, and as cost-effectively as possible. This often results in a shift of responsibility and costs to the buyer, and in some cases they convey the property without having a clear title. An experienced foreclosure lawyer like Bruce R. Jacobs can protect your interests by making sure you’re only paying what you’re obligated to pay and that you receive marketable title and an acceptable title insurance policy.
2. Secure financing or a pre-approval. Banks won’t even consider you a legitimate buyer if you fail to provide a proof-of-funds letter from your bank or a pre-approval letter from your lender or mortgage company. Because the REO market is so competitive, any misstep during the offer process can slow you down and allow the bank to move on to the next offer.

While this article covers the basics of buying a foreclosed property, there is much more to know about pre-foreclosures, the foreclosure auction, and the REO market, including title issues caused by, among other issues, defects in the underlying foreclosure case.

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Contact Bruce R. Jacobs to find out how he can help you with the closing of your foreclosure transaction. You can contact him by phone at (954) 961-1993 or by e-mail through this web site to schedule an appointment and learn more about your rights. He offers a free initial consultation.

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