Foreclosure Countdown: The Foreclosure Process Step-By-Step

Foreclosure is, unfortunately, a major part of the current real estate experience. It is happening at an alarming rate – more than 405,000 households were foreclosed upon in 2007, up 51% from the amount repossessed in 2006.

I just received an email from one of my readers named Rik who’s asking about foreclosure home auctions and the foreclosure timeline – let’s read:

Hi Michael,

Once your home is sold at a Public Auction by the bank, how long do you have to vacate the property?

Rik

Every state in the United States has their own guidelines, timeframes, and mandates. It usually takes around 2-3 months for your home to get repossessed – however, if you take certain legal action to postpone the proceedings it may take even longer.

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Step One: Notice of Default

First step in the foreclosure process is the notice of default. This is a notification that will be sent to you stating that you haven’t made your payments by the deadline. It’ll say that if the money you owe isn’t paid by the time they give you, the lender may foreclose on your home. Others that may be affected may also be getting a copy of this notice as well.

Step Two: The Lis Pendens

Now the heavy duty foreclosure action starts happening. The lis pendens, which is Latin for “suit pending” and often abbreviated as lis pend, represents the first real legal action against you by the lending bank. It is a written notice that the lender has filed a lawsuit against you on your house and demands payment of your loan immediately. If you wanted to sell your home before foreclosure, it is best for you to do this before the lis pendens, because now a potential purchaser can see that this has been filed against you in the public records, making your property less desirable to potential buyers. The reason for the lower desirability is that if someone buys your home after the lis pendens has been served, they are now subject to the decision of the lawsuit. It also makes you much less likely to be able to borrow money secured by the property (for example if you wanted to borrow money to pay legal costs) as lenders will be wary of your lis pendens property.

Step Three: Answer

At this point, you have 20 days to file an answer with the court. My recommendation? Get yourself a reputable attorney in your area with experience to do this for you. There’s a great legal community over at the international law forums that may also give you solid advice. The general idea of what will happen in this step if you need more time is that you will contact the other attorney, let them know you are retaining counsel, and that you ask for a short extension of time to respond to the complaint. Follow this up in writing as you need written proof.

You must answer this complaint filed against you within the allotted time frame given to you (usually 20 days). Otherwise, a default judgment will be given against you which can mean major future financial hardships. Your lawyer will then write them a letter either admitting, denying, or stating you don’t have the sufficient information to answer a section of the complaint. Many times, contacting the lender’s attorney and telling them, “We Deny the Complaint” may buy you some time.

Step Four: The Hearing

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This is where you and your lawyer will present your case and the presiding judge will decide the next step. If there is a valid answer as to why you haven’t made your payments on time, the judge may decide the lender must give you reasonable time to make your payment. Otherwise, the foreclosure moves forward, with the mortgage lender’s legal counsel filing a motion for a Summary Judgment Hearing.

The scheduling of the hearing is often delayed, giving you previous time to get your affairs in order – possibly giving you enough time to execute a short sale (which is when your lender agrees to letting you sell the mortgaged property for less than the outstanding balance of the loan).

Step Five: The Summary Judgment Hearing

This usually happens 45 days from the start of the foreclosure process. The mortage loan lender’s attorney will present the case and you or your attorney can give testimony. Usually, the judge will rule against you and you will be found in default of the mortgage. You will receive a Summary Final Judgment that shows exactly how much you owe the lender, including the loan principal, loan interest, and legal fees.

Step Six: Foreclosure Auction

The judge will know set a sale date for the foreclosure auction of your home, which is often 30-45 days after the Summary Judgment Hearing. Your property will now be sold at the county courthouse steps to any interested real estate investors or homeowners. At this point, you cannot redeem your property – the sale is final. You now have absolutely no chance to save your home and pay off your mortgage. Once the sale occurs, the court will review the sale during the next 10 days to make sure everything has been followed correctly procedurally. Once the auctioned property is certified, the Certificate of Sale is now filed and the title to your home is given to the new homeowner. If no one bids on your property, it then goes back to the ownership of the lender as a REO (Real Estate Owned by the plaintiff).

Step Seven: Sheriff

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This is usually 14-30 days from the date of the sale of your home at auction – you will be notified how much time you have to leave your home. At this point, if you still haven’t vacated the premises, the new property owners will have already started the eviction process and the sheriff will arrive at your doorstop and will force you to take you and your possessions outside. You are now not legally able to enter your home – you will be charged with trespassing.