Foreclosure Than Ever Before

Foreclosure Than Ever Before

The last several years have been very unique in the long-term real estate market. Drops in prices, banks owning houses, new foreclosure filings; this has been our norm.

However, 2013 is continuing the trend of 2012 of bucking our recent trend with many signs of improvement. Interestingly enough, while a "glut" of buyers now fills the market, the foreclosures haven't yet slowed down.

What's the foreclosure process anyway? How does it work? I get these questions all the time from home buyers. It makes sense to cover all bases in the early period of searching because chances are many houses we'll see under $250,000 will be some form of distressed property. This is why it's so important as a home buyer to have a working understanding of short sales, foreclosures, and what to expect if you make an offer for one. When will the seller respond? What if there's another offer? Who is the seller anyway - the bank or a family?

This is a link to the Dakota County Foreclosure Map

A quick review of foreclosure 101:

First, a borrower misses a payment on their mortgage. Their mortgage company contacts them to see what's going on. A few more payments are missed and then the mortgage company starts a foreclosure notification procedue which could include posting several notices in the legal news or local newspaper. A few more months go by and a sheriff sale is held at the local county courthouse. Usually the mortgage company is the high bidder though occasionally an investor or other individual will outbid the mortgage company by $1. Either way, the end result of a sheriff sale is a 6 month waiting period during which the borrower can still live in the property and more importantly, redeem the property by paying off the debt in full (with a refinance, property sale, restructuring the mortgage somehow, winning the lotto, etc). In some cases the 6 month period can be shortened to 5 weeks if the property is vacant, and sometimes the occupants are paid cash to leave early. 

When the process is complete and the bank finally does own the property, they sell it. Usually the bank hires a real estate broker to represent them and list the property for sale after the property has had new locks put on the doors, received a top to bottom cleaning (or a simple trash removal in many cases) and perhaps sat a few more months while the title work and legal arrangements were verified and cleaned up. While this portion of foreclosing property hasn't changed much in a long time, the methods used to actually sell the property are in the midst of big changes.

See my article on making offers for foreclosures!