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The Stages and Phases of Foreclosure

With all the talk of foreclosures swirling around nowadays, it’s critical to know that there are 4 different phases of foreclosure. The following breakdown of the four different stages of foreclosure, from, will help you understand your rights and responsibilities throughout the entire process.

Stage One: Missed Payments

Must fall behind in payments by 90 days, before the foreclosure process is started.

Must miss more than 3 payments.

As a homeowner you still have a number of options at your disposal.

Rework finances

Call lender to work out a compromise

Put your home on the market for a fast sale.

Stage Two: Pre-Foreclosure

Homeowner has already missed more than 3 payments.

Lender records a public notice that the owner has defaulted on their mortgage.

Notice of Default (NOD) is sent to the homeowner.

This is known as the “grace period.” The homeowner still has 3 months to “cure” the default. The “cure” is to work out an arrangement with the lender, sell the place, or come up with the cash that is owed to the lender.

Stage Three: Auction

Foreclosure enters auction phase if default is not cured in 3 months.

Lender sets a date for the auction.

Homeowner still has “right to redemption” up until the moment of the sale. (“Right to redemption” means the homeowner can come up with the outstanding cash and stop the foreclosure process.)

Auctions require cash payment.

Step Four: Post-Foreclosure

If property is not sold at auction, the lender takes ownership.

Property is now a bank owned property, or Real Estate Owned (REO.)

REO is sold by a local real estate agent or at an REO liquidation auction.

If you’re interested in buying a foreclosure, check out the blog from October 7 on the Advantages vs. Disadvantages of Buying a Foreclosure.

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