Once the borrower has received the Notice of Default and the notice has been posted publicly and usually printed in the local newspaper, the formal foreclosure process is in motion. The borrower’s failure to comply with repayment terms has activated the mortgage’s acceleration clause and the lender requires full payment of the loan.
If the Notice of Default does not result in full repayment, the lender next issues a public Notice of Sale. A copy, stating the time, date and address of the public auction where the property will be sold is sent to the homeowner. The notice is also posted on the property.
The sale is called a Sheriff’s Sale. It is the second major stage of the foreclosure process and follows the preforeclosure stage, which commenced when the first payment was missed. The typical Sheriff’s Sale involves the following steps:
· The auctioneer reads a description of the property and any legal notices related to the address.
· The bidding begins. Usually the bidders have prequalified to participate by depositing a check in advance. The bidding process continues until the auctioneer accepts the highest bid.
· The paperwork is drawn for execution by the successful bidder. The successful bidder is usually given a grace period to arrange financing for the property. Once the financing is in place and paid, the title is given to the new owner.
At this time, the original owner may still reside in the home. The Sheriff’s Sale is not an eviction proceeding. The successful bidder may initiate eviction proceedings at any time after receipt of the title. The evicted homeowner may have to vacate within 72 hours.
In the event the property is not sold at the auction, the property becomes Real Estate Owned (REO) and ownership goes to the lender. This usually occurs when prospective bidders feel the property is not worth what is owed. If the borrower and lender agree to sell the property to the lender prior to the auction stage, this step can sometimes be avoided. In either case, when a successful bidder is found or when the home enters the REO stage, the foreclosure process is essentially complete.
The entire foreclosure process usually take anywhere from six to eight months but can occur more rapidly. Homeowners who anticipate difficulty making timely payments must act rapidly. There are a number of possible remedies but inaction is not one of them.