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List: Posted: 01/09/12
There are many reasons why you need to understand the foreclosure process. This information can be extremely helpful, whether you are interested in investing in real estate or you are simply looking for an affordable home.
If you would like to know more about foreclosure, then look no further. You will find that this guide will provide you with all the information you need.
Foreclosure Terms You Must Know
First, know what foreclosure means. This term refers to a home or property that the owner is no longer able to pay for. When their time for repayment runs out, the lender will put the home in the process of foreclosure. This means that the bank will take the home from the owner and try to sell it themselves, to settle the debt.
Short sale is the beginning of the process, when an owner who is in trouble financially will have a chance to sell the home before it goes into foreclosure. This will save the owner and the lender a great deal of hassle and headache.
REO means to “real estate owned.” This is the end part of the process, when the home did not make short sale and did not sell in auction. At this point, the house will belong entirely to the lender and will be sold by the lender.
GOV refers to “government owned properties.” This would be homes that were purchased through government financing programs, like the VA for veterans or HUD lending.
The 3 Steps of Foreclosure
Next, you will want to know that the home will go through a process of three steps during foreclosure. These three steps will affect how you place a bid on the home or negotiate for it.
Step 1: Short Sale
The first part is a short sale. This is when the owner knows that there is a problem and they will not be able to be able to keep the home. At this point, the owner could possibly sell the house themselves before things get any worse. However, the owner will only be able to sell the property based on the numbers that the lender presents - not dramatically over or under that price.
Step 2: Public Auction
Next, the home will go to public auction. At this point, it is already foreclosed on, and the bank is now trying to sell it. At auction, people will have a chance to bid on the property for discounted prices.
Step 3: Property Becomes Real-Estate Owned
If the home does not sell at auction, it will then become REO or GOV, depending on who the lender was for the mortgage. Anyone who wishes to invest in the foreclosure property will need to make sure that they deal with the lender directly, since the property will no longer have anything to do with its previous owner.
The most confusing part of foreclosure is that there are a great deal of legal terms and phrases to understand. However, as you can see from this guide, you can find the right home to purchase or invest in when you understand the terminology used in the process.
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The material in this article is for informational purposes only. The views expressed in this article are those of the author and do not necessarily reflect the views or opinions of Local.com. See Additional Information