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FORECLOSURE
Mortgage Owned Properties (REO)
If the property owner faces financial difficulty and fails to pay mortgage payments for the property, the property becomes default. Financial lender, then take action to acquire their unpaid mortgage debt and forecloses the property. There are three foreclosure phases that real estate investor can encounter and profit; pre-foreclosure, foreclosure sale and mortgage owned properties.
There are two types of foreclosure procedure depending on the state or county; Judicial foreclosure and non-judicial foreclosure. In Judicial foreclosure, financial lender informs the property owner and other junior liens that the property will be foreclosed. If property becomes default and financial lender brings the case to the court. The financial lender will put foreclosure sale notice on the newspaper and foreclosure sale will be held if the homeowner doesn't pay up the debt before auction date. In non-judicial foreclosure, financial lender puts notice of default in the newspaper to foreclose on the property without bring it to the court.
Financial lender may only try to acquire the amount of mortgage owned, taxes, interests and penalties and court costs at the foreclosure sale. By law, financial lender is not to gain profit by foreclosure sale and only get final judgment amount, if they acquired more than they are owed then the rest amount goes to property owner. Often the sale price may not cover the loan amount. If financial lender takes title to the property at the foreclosure auction, however, they can resell it as REO.
Property may have several lien on the property such as first mortgage, second mortgage, property taxes etc. During foreclosure process, all junior liens are wiped out. The senior lien holder has right to foreclose. IRS tax and property tax liens are senior liens above mortgage liens. If mortgage lender want to collect their debt by foreclosure, they may pay off tax and IRS liens to be the senior lien on the property.
Want To Learn More About Foreclosure Investing?
Get Foreclosure Properties from Foreclosure ListingsRead Books on Foreclosure
Learn from Foreclosure Coach & Mentor.
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