Oh, the frustration! Thousands of people out there buzzing about things they don’t fully understand. Like ‘foreclosure property’. Seems it’s on everyone’s lips. But did you know there are actually different phases of the foreclosure process? Didn’t think so. Now if you’re good, I’ll share some of the biggies with you. Ready? OK…
- The homeowner stops paying the monthly mortgage. This generally is not cause for celebration among lenders, so typically this group will –
- File a Notice of Default (NOD), and voila! — the house in question is officially in FORECLOSURE.
- The lender launches the selling process. But don’t expect the one-day swimsuit sale at Macy’s. A year or more might breeze by before the auction date is even set. During this time lag, a homeowner can:
- Watch the bank eventually yank their home away.
- Do a short sale. You’re basically asking the bank to accept a loan reduction. Sure, they’re losing money. But in the long run, they’ll probably wind up with the same haul they’d get on the auction block.
For the bank, the latter move is a major headache-reducer. I mean, if said foreclosed upon property doesn’t woo an auction buyer, it’s the bank’s to sell. So lenders get all the fun of hiring a realtor, fixing the place up, sitting on the property until sold, and forking over a 6% commission. Who needs that?!!
As responsible sellers, banks are inclined to keep their real estate owned (REO) properties in tip-top shape. This gives buyers a welcome guarantee of quality, well-maintained merchandise. Short sales, on the other hand, are a mystery. Did the owner care for the property? Probably not. According to the immutable laws of human nature, most people just don’t give a shoestring about something they’re going to lose.
So you can see there’s more to foreclosure than meets the ear. Fortunately, you’re now well-versed in the differences between a NOD, being in foreclosure, a short sale, and an REO. And that means you’re poised to pounce on the current crop of L.A. foreclosure properties. I’m telling you, this niche definitely is adding major pep to our real estate recovery. How hot is the foreclosure frenzy? A year ago on my street, four foreclosure homes had ‘for sale’ signs in front. That number now stands at zero. I rest my case.