How do foreclosures and defaults work?
The law varies from state to state. In California where I am located, the Trustee’s sale gives you nothing but the interest of the lender. You do not get a guarantee of title. There are often other liens that are not released in the trustee’s sale that you must pay. For example tax liens are not released and they now become your obligation. . Often, unless you really know what you are doing, you do not know if you are buying a loan that is in first position or second position or worse. If you buy a loan in second position you must pay off the first. I have seen inexperienced people at these sales buy a loan in second position thinking they were buying a first, only to discover a lender with a loan amount of several hundred thousand dollars in first position that also had to be paid. Then the property was not such a good deal. You cannot finance these properties. You must pay cash.
• This is not correct. The banks do not auction many of them off. They try to sell them on the MLS for a year or so. • This depends on the state… take a look at this site: http://www.realtytrac.com/foreclosure-laws/foreclosure-laws-comparison.asp In most states, once the borrower is 2-3 months behind on payments, the lender can file foreclosure proceedings. Depending on states, the auction can happen in as little as 2-3 weeks to as long as 2+ months later. For example, in Maryland, once foreclosure is filed, the auction usually takes place within 1 month of the filing. Paying cash at auction depends from state to state. In my area for example, you will pay the deposit (usually equal to about 10% of the original loan amount), then pay the balance within 14-30 days. If they cannot get a reasonable offer at the auction, they will buy the property back and it will become an REO (meaning they will market the home themselves). • It’s more complicated than that. Way more complicated. At lea
