| The foreclosure process begins when a borrower is 3 | | | | If a property makes it all the way to auction, a trustee |
| months or more behind in their monthly mortgage | | | | appointed by the lending company will announce the |
| payments. When this happens, the bank will typically | | | | minimum bid on the property (this is set by the lending |
| post a foreclosure notice at the courthouse where the | | | | company). Many times, no one bids because the |
| property is located. This is known as a foreclosure | | | | lending company has set the opening bid too high. |
| filing. | | | | Other times, the opening bid is reasonable and people |
| Once this item has been posted, the property will go to | | | | begin bidding on the property. |
| auction on the first Tuesday of the following month. | | | | If someone is the high bidder on the home, they must |
| Mortgage companies must post the notice of | | | | produce the cash to buy the property (to the trustee) |
| foreclosure at least 21 days before the foreclosure | | | | before the end of that business day. Therefore, it is |
| sale which takes place at the courthouse steps, | | | | essential that the buyer at a foreclosure auction has |
| typically. | | | | the cash necessary to make the transaction. |
| In almost 80% of the cases, the borrower will catch up | | | | If no one bids on the property at auction, it then goes |
| on their mortgage payments or reach an agreement | | | | to a HUD registered agent (if the home was HUD |
| with the lending company so that the property does | | | | insured). Otherwise, it goes back to the lending |
| not get foreclosed on. Other times, investors will | | | | institution who typically hires a realtor to list the |
| contact the owners of these properties and buy the | | | | property and sell the home. These are REO Homes. |
| properties directly from them before the foreclosure | | | | Since about 20% of foreclosure postings make it to |
| occurs.. Sometimes, the buyer will offer the mortgage | | | | auction and about 1/2 of those make it through the |
| company less than what is actually owed on the | | | | auction without being purchased, only about 10% of |
| property. If the lender accepts the offer, this is known | | | | preforeclosures end up being an REO Home listed by |
| as a short sale. | | | | a Realtor. |