What exactly is foreclosure on a house?
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Answer:
When a person owe's money that they cannot or will not repay, the lender can move to seize their property and possessions for auction or sale to obtain some or all of the funds owed. It is usually a bank who forecloses on a house, when a mortgage is not repaid or payments stop.
It is when the financial institution that is mortgaging your home files legal paperwork to take back your home for nonpayment or lack of payment. It takes up to six months, and then court, and then they make you move out...It looks really bad on your credit report and stays there forever..
if u can't pay your mortgage
the bank takes your house away
A homeowner is delinquent on making mortgage p payments on their house the mortgage company then puts a foreclosure on the home and it is up for bid starting at the balance of the mortgage amount which may include any fees.
You no pay... you no stay.
Bidding starts at what is owed, including fees, back payments, etc. This is USUALLY more than what the house is worth, so USUALLY the bank gets the property and then lists it for sale with a Realtor at how much it's worth.
When what's owed is less than the actual value of the property, investors bid against each other until only one is left - if none of the investors was able to buy it first from the person being foreclosed upon.
For example: In 2003 someone buys a house for $200K. They get behind in 2004, and the bank agrees to put the 4 months of missed payments onto the back end. They now owe $206K. In 2006, again they get behind and the bank does not want to let it slide. House goes to the courthouse steps. Opening bid is now $215K (with all the new back payments and attorney's fees, etc.)
Or.. In 1984 someone buys for $100k. They get behind in 2006 and now owe $50k. The smart investors find the owner and offer $100k and own a house worth probably $200k. If they wait until the courthouse steps, bidding could easily go to $180k. However, most people who have a house worth $200k who get behind will put it on the market and sell it for more of a reasonable price... even a steal at $180k.
Foreclosure laws vary from state to state. Once the bank forecloses the previous owners leave or are evicted. The bank or lending institution then looks at the market value of the property and attempts to sell the property for whatever the current market value is. It is unrelated to the lien or liens that were foreclosed upon. The bank often takes a loss but not always.
The banks buy 95% of the homes back (from themselves, really) on the courthouse steps. Then, they usually have them appraised and resell them through traditional means. If you are talking about REO's, the price quoted by the bank is the "asking price" and bids may go higher or the bank may take a lower offer. If the homes need cosmetic work, they can sometimes be bought for a significant discount from fair market value.
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