How Does Foreclosure Work In General?

The question, how does foreclosure work, is a question that all homeowners should be able to answer. It is true that single family homes are not the only homes that people are unable to maintain. As you can imagine, there are many misconceptions about repossessed homes and properties.

Simply put, these homes are foreclosed because the homeowner failed to make the mortgage payments. When a homeowner fails to pay mortgage for usually 3 or 4 payments, the lender generally has no option but to issue foreclosure by selling the house or repossessing it.

The thinking behind this move is simple. If you cannot afford to pay one month, how can you afford to pay four? Obviously, your house is the absolute last thing that you want to loose. However, home foreclosures do happen. Unfortunately, for one reason or another, things happen to people. In this article we will look at some of the whys and wherefores of foreclosure.

Clearly, home foreclosure is an unpleasant situation that some families face right up to today. Even intelligent families who understand the answer to the perplexing question, how does foreclosure work?

Listen very closely, foreclosure is not just restricted to residential suburban homes. As you read this article you will soon find out that expensive homes like exclusive penthouses, condominiums and even mansions find their way into the foreclosure market.

If you are looking for a simple answer to how does foreclosure work, I don't think there is one. However, we will now look at a few salient points of foreclosure.

It is crucial for the homeowner to know the terms and conditions of their mortgage loan. They must know interest rates, deadlines of payment, agreements and conditions between them and the lender. Knowing and understanding this information will help to avoid the risk of foreclosing the property to the lender.

How Does Foreclosure Work?

If you find yourself in the unfortunate position of missing a number of mortgage payments; your mortgage lender is within his rights to sell or reprocess your home. Whenever that happens, the property is usually auctioned.

Judicial Foreclosure

In judicial foreclosure the lender sues the homeowner. If the homeowner chooses not to respond to the lawsuit, the lender wins. In the next step, the property is put up for auction. A court official is put in charge of the auction.

Auction participants will have to compete with the mortgage lenders bid. If no one outbids the mortgage lender, he repossesses the house. Otherwise, the deed will go to the highest bidder. The court official supervises the complete proceedings. The pecking order goes somewhat like this. First the terms and conditions of the loan are satisfied. Then other liens or parties involved and finally on to the mortgagor.

Foreclosure By The Power Of Sale

By far the most popular type of foreclosure is the power of sale foreclosure. At this time, the lender is in total charge of the sale of the property. The court has no legal jurisdiction over this type of foreclosure.

As soon as the property is sold by the lender; the proceeds earned from the sale will be used to pay off the amount owed by the former homeowner. If at the end of the day the proceeds are not enough to cover the amount owed, the lender will issue a deficiency judgment.

Some Rights During Foreclosure

1. You can only get kicked out of your home with a court order. Legal proceedings have to be followed first.

2. Even after foreclosure is over a court order is needed by the new owner to get you evicted.

3. If you fail to show up to court or follow court orders, you could find yourself facing eviction within 48 hours.

4. Foreclosure can take as much as one year and as little as six months.


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Answering the question, how does foreclosure work can be very complex at times. Surely buying a house is not like purchasing goods at the supermarket where you can expect the cashier to give you the title of the property after you give your payment. It requires complex deals between the lender, the bank and you, the homeowner. Information is key, arm yourself here: http://www.clefinfodesigns.com/foreclosure