FAQs About Foreclosures

What is a Foreclosure?

• A foreclosure is a proceeding that extinguishes all rights, title, and interest of the owner of property in order to sell the property to satisfy a lien against it.

• The foreclosure sale is the sale of the property used as security for a debt to satisfy that debt.

Why Would My Seller Want the Foreclosure to Happen Rather Than Trying to Negotiate a Short Sale?

• A foreclosure can drag out, which allows the owner to stay in the property and not make payments.

• If the seller files for bankruptcy, this will stay the foreclosure proceeding and give the seller additional time.

What Do I need to know if I am representing a Seller that is being foreclosed on?

• If foreclosure proceedings have begun, the seller can still sell the property before the foreclosure sale.

• If the seller can negotiate a short sale, the lender will stop the foreclosure and pursue that option.

• If the seller is unable to negotiate a short sale, be sure that any closing for the sale of the property takes place in advance of the foreclosure sale. Once the foreclosure sale happens, the property is no longer the seller’s to sell.

What Do I need to know if I am representing a Buyer that is Buying Property that has
Been Foreclosed On?

• EXPECT DELAYS!!!!

• Closings for REO (Real Estate Owned) property frequently do not happen when planned. If your buyer is on a tight time line and has to be in the property on a certain date, this type of property may not be the best option.

• The lender will be represented by an attorney for these closings. The closing attorney’s office will have to coordinate with the lender’s attorney in order to get seller signatures on all necessary documents. This can often take days! Many lenders require that you send a HUD to their attorney 72 hours before closing, and you can expect that you often will not receive it until after closing.

• Remind your buyer that their patience is worth it – most homes are not sold at their full market value when they are sold as an REO, so your buyer is probably getting a good deal!