The Process of Foreclosure
Tabatha Prentice
BUSN 121: Real Estate Practice Proffers: Steve Kipuros

Foreclosure Process
Intoduction
Foreclosure is a process where a homeowner forfeits there rights to a property because they have failed to pay the mortgage. In some cases a bank may allow the property owner to sell their home via a short sale. If the bank will not grant a short sale the property will go to auction where it will either be sold or becomes bank owned. The word foreclosure has become a very dirty word, but it doesn’t just happen overnight it is a lengthy process. There are five major steps involved in all states missed payments, public notice, pre-foreclosure, auction, and post-foreclosure.
Missed Payments The length of which it can take a bank to foreclose on a property can vary by state. Normally it will take at least three missed payments, but can take up to five before the foreclosure process will begin. There are programs out there available for homeowners to help them keep this process from ever being started that include everything from mortgage modification to government assisted programs. For most homeowners foreclosure has almost become of choice mostly related to the decrease in home values we are seeing more and more people who are house poor.
Public Notice After a number of payments have been failed to be made the lender will seek out the County Recorder to issue a public notice. This notice can be called many different things depending on the state in which you live. The notice is an attempt to make the homeowner aware of the situation, and its severity. In most situations there will be multiple notices sent out in several different ways including but not limited to being posted on the door. In reality, starting a foreclosure action sooner rather than later can be a motivator that produces positive results. Of all the foreclosure actions initiated, only a fraction will go all the way through the foreclosure process. The action itself communicates a consequence of not paying, causing the property owner to focus on a way to resolve the problem by borrowing the funds via an equity or reverse mortgage or by selling the property. (Scanlon, 2001) Once the occupant has had ample time to attempt to make arrangements the bank or lender will begin the pre-foreclosure process.
Pre-Foreclosure
Pre-foreclosure is also known as the grace period for the homeowner it can be anywhere from 30 to 120 days. This period allows the homeowner to try and make an arrangement with the lender including paying the outstanding payment. Our an attempt to get the lender to agree to the possibility of a short sale. "A short sale is usually a better deal for everyone the buyer, the homeowner and the lender than would be the result of continuing through the foreclosure process with the property," said Freeman. "The seller needs to get the lender to agree in principle to the idea of a short sale, and reaching that initial agreement is typically a key responsibility of the sellers real estate agent. The agent wants to determine upfront what the lender will require from both the seller and the eventual buyer in order to formally authorize the sale and close the transaction." ("Real Estate Agents Learn," 2008) Auction If an arrangement has not been made by the deadline set forth by the lender the homeowner will then receive an official foreclosure auction notice. In almost all states this notice must be recorded with the county, sent to the borrower, posted on the property, and printed in the public newspaper. In many states the homeowner has up until the property is officially sold at auction to come up with the outstanding balance. Homes sold at auction are on a cash only basis, and usually sight unseen. Because the number of people who actually have cash on hand to buy these properties are very limited many of these homes will become bank owned property and officially listed as a foreclosure.
When a property is purchased, the property is transferred using a deed. When a property is purchased using a loan, a third party becomes involved known as the trustee and the property is transferred using a deed of trust, which gives the trustee the right to sell the property if the homeowner fails to make payments without involving the courts. While there are not many laws to protect the homeowners or land lords from foreclosure, there are laws that protect tenants if the property that they are renting is being foreclosed on.
Post-Foreclosure
If the property was not purchased at auction the lender can officially take possession of the property and will now be termed bank owned property or REO for real estate owned. The lender will then list the property for sale, and almost always in as is condition. When a home is listed as a foreclosure there are two things to remember the disclosure to property conditions may be very limited, and there tends to be less room for negotiation as the bank is trying to recoup their funds. "Although collection and foreclosure practices are not uniform from state to state, the need for revenues to support budgets and community services is universal." (Scanlon, 2001). What must be understood when it comes to foreclosure is that no one party really wins it is a significant cost to the homeowner and to the lender. With housing markets steadily trying to incline, and new communities popping up all over the place foreclosed properties become harder, and harder to sell. Each state has a specified set of guidelines that must be followed before the foreclosure process can even begin. We must understand that in a perfect world there would be no need for foreclosure, homeowners would be able to make their payments on time and banks would earn the profits that are set forth in their contracts. However; this is not a perfect world and foreclosure is something that happens daily in even the wealthiest neighborhoods. This means a huge financial loss for all parties involved this makes laws governing foreclosure a must, and it also emphasizes the need for more programs to help those families with financial need to help save their homes.

References
Lainie , P. (2014, Jule 22). Federal foreclosure protection laws. Retrieved from http://ehow.com/about_6301539_federal-foreclosure-protection-laws.html (Lainie , 2014)
Understanding Your Foreclosure Rights: A Consumer Law Review. (2008, August 8). Retrieved August 7, 2014.
Olens, S. (n.d.). Mortgage and foreclosure information. Retrieved from http://law.ga.gov/mortgage-and-foreclosure-information (Olens)
Real Estate Agents Learn the Intricacies of the Short Sale. (2008, August 8). Daily Herald (Arlington Heights, IL). Retrieved from http://www.questia.com
Shiller, R. J. (2008). The Subprime Solution: How Today's Global Financial Crisis Happened and What to Do about It. Princeton, NJ: Princeton University Press. Retrieved from http://www.questia.com