How Bank foreclosures progress
Whether you are looking to buy a foreclosure property or going through foreclosure yourself, it pays to be familiar with the bank foreclosures procedure. The exact details vary from state to state, but you can expect foreclosures to go through the following steps:
The homeowner fails to make a scheduled loan or mortgage repayment.
After two weeks
The bank will attempt to contact the homeowner to query the late payment. A fine may be charged to the loan account.
After six weeks
If payment is still outstanding, the bank will send a formal 'demand' letter notifying the homeowner that the conditions of the loan have been breached. The homeowner is typically given 30 days to repay the outstanding amount.
After two months
If payment is still outstanding, the bank will refer the case to its foreclosures department.
After three months
The bank initiates formal foreclosure proceedings. A notice of default is filed in the county court and the homeowner is notified by mail within ten days. The notice of default may also be published in local newspapers. If the bank is unable to contact the homeowner, further notices will be sent out at regular intervals.
After six months
A date is set for the sale of the property and a Notice of Trustee's Sale (NOS) is filed at the local County Recorders office, listing the date, time and place where the auction will take place. The notice is published in an adjudicated newspaper in the area where the property is located. The homeowner is permitted to sell the property independently to repay the debt, but the sale must be completed before the official auction date.
One week before the sale date
The homeowner's right to reinstate their loan expires. Prior to this date, the loan can be reinstated at the discretion of the bank if all outstanding debts and charges are paid in full.
Seven to 18 months after the first defaulted payment
The property is sold to the highest bidder at public auction. The buyer must pay for the property in full and the former owner must vacate the property. If the auction fails to raise enough money to cover the outstanding debt, the bank can sue the former owner for the remaining amount - known as a 'deficiency'. Alternatively, the bank can take ownership of the property and sell it on the open market as Real Estate Owned (REO) property.