If you have ever watched the evening news or read the newspaper, you are bound to have come across the term foreclosure in at least one point in your life, but that doesn’t necessarily mean you know what they are. Foreclosures occur when there is still a mortgage on a house and the owner of the house is unable to pay the mortgage.
At this point, the lender goes to court and files a public default notice. The bank or mortgage company does not want the property, they just want their money. Either the owner of the house can auction it off or the bank or Mortgage Company that acquires the house will auction it off. In foreclosure, a lender gets back the money owed on a defaulted loan and gets ownership or right to sell the property on securing the loan.
Reasons Why Foreclosures Occur
There may be many reasons why foreclosures occur. The most common reasons may be death, divorce, or bankruptcy. It may also be because the owner took on too much loan and the payment amount is spiraling out of control. Many real estates are sold on auction but there are many which are sold on the traditional real estate market.
Although foreclosure is the most widely heard term in the real estate market, there is a period at the beginning of the process, where the property owner still has the chance to re-establish his loan if he pays off the default amount. This payment is made during what is called the grace period, or pre-foreclosure period, which is determined by the law of the land of jurisdiction.
The borrower or owner can also dispose of the property during this pre-foreclosure period. They can repay the loan and there will be no foreclosures in his or her credit history. Otherwise, the lender can then legally own the property by entering an agreement with the borrower or owner during the pre-foreclosure period. If an auction ensues, the third party buys at the end of the pre-foreclosure period.
Where to Find Foreclosures
If a person wants to purchase just the right real estate foreclosure, they may want to visit online real estate foreclosure listing services, classified newspaper ads, and keep their eyes and ears always open to their surroundings. There are also judicial foreclosures and this is the sale of the mortgaged property under the jurisdiction of a court. The resultant proceeds go into satisfying the mortgage.
Profiting and the Foreclosure Process
Many people buy a home thinking it will appreciate and its value will increase but when the reality is debt, the story is different. There is the possibility of the foreclosure on the property. Real estate foreclosures are very lucrative and the buyers can make good money. A real estate foreclosure means you are obtaining the property at a lower cost and reselling it at a higher price. The mortgage and the ensuing process are very long drawn and that is why mortgage companies or the banks do not want to get these foreclosure properties.
Now you know the truth behind real estate foreclosures. Depending on what side of the foreclosure process you are on they could either be a nightmare or an opportunity for profit. Stay informed and you will never find yourself on the wrong side of the fence when it comes to your real estate investment.