Given the state of South Florida’s commercial and residential real estate markets, the term foreclosure has been thrown around a lot in recent years. This has left many people wondering, what exactly is a foreclosure and am I at risk?
According to Wikepedia, “foreclosure is the legal and professional proceeding in which a mortgagee, or other lienholder, usually a lender, obtains a court-ordered termination of a mortgagor’s equitable right of redemption.”
To simplify it a bit, foreclosure is a legal process in which a lender takes ownership of a property when you the borrower is unable to make the payments.
Over the past several months, we have discussed several topics relating to foreclosures. We’ve looked at the foreclosure rate in South Florida, buying commercial foreclosures, and most recently pre-foreclosures.
Today, we’re going to review the types of foreclosure and the steps in the foreclosure process.
Two Types of Foreclosures
There are two types of foreclosures: judicial and non-judicial.
1. In a non-judicial foreclosure a third party is allowed to foreclose or take back any property that is in default. With this type of foreclosure, the mortgage lender is not required to file a lawsuit to take the property. The entire foreclosure process could take as little as 2 to 4 months to complete. Non-judicial foreclosures occur in deed of trust states.
2. A judicial foreclosure takes place in mortgage states. With this type of foreclosure, the lender is required to file a lawsuit in order to foreclose on a property that is in default. Because of this requirement, the foreclosure process may take longer to complete. Florida is a mortgage state and thus, falls under the judicial foreclosure category.
The Foreclosure Process
If you are considering buying a foreclosure, it is important that you understand the steps in the foreclosure process in order to catch properties at the best possible price. Generally, there are 3 steps and they are:
1. Pre-foreclosure. During this time period, the property owner is likely behind on mortgage payments although no legal action has been taken to commence the foreclosure proceedings. During this time, the property owner is inclined to entertain offers of settlement to avoid the foreclosure and save their credit rating.
2. Notice of Default (NOD). This step is the first legal step taken in a formal foreclosure process. The NOD commences the foreclosure action.
3. Foreclosure sale. If actions aren’t taken to stop the foreclosure process, eventually the lender will succeed in taking the property back. Whether you’re in a judicial or non-judicial state will determine the length of the process. In non-judicial states, the process could take months and in judicial states even longer. In the latter, once a judgment is reached the foreclosure sale is scheduled to take place on the courthouse steps.
In some states, property owners are given a time period in which they can get their property back. This period is known as the redemption period, and is not applicable in the state of Florida.
If you’re interested in learning more about buying foreclosures or pre-foreclosures, we want to hear from you.
Tags: Foreclosure, pre-foreclosure, South Florida
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