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Understanding Foreclosures

It is an unfortunate commentary, but when economic activity declines and housing activity decreases, more real property enters the foreclosure process. High interest rates and creative financing arrangements are also contributing factors.

When prices are rapidly accelerating during a real estate “bonanza”, many people go to any lengths available to get into the market through investments in vacation homes, rental housing and trading up to more expensive properties. In some cases, this results in the taking on of high interest rate payments and second, third and even fourth deeds of trust. Many buyers anticipate that interest rates will drop and home prices will continue to escalate. It is possible that neither will occur and borrowers may be faced with large balloon payments becoming due. When payments cannot be met, the foreclosure process looms on the horizon.

In the foreclosure process, one thing should be kept in mind: as a general rule, a lender would rather receive payments than receive a home due to a foreclosure. Lenders are not in the business of selling real estate and will often try to accommodate property owners who are having payment problems. The best plan is to contact the lender before payment problems arise. If monthly payments are too hefty, it may be that a lender will be able to make some alternative payment arrangements until the owner’s financial situation improves.

Let’s say, however, that a property owner has missed payments and has not made any alternate arrangements with the lender. In this case, the lender may decide to begin the foreclosure process. Under such circumstances, the lender, whether a bank, savings and loan or private party, will request that the trustee, often a title company, file a notice of default with the county recorder’s office. A copy of the notice is mailed to the property owner.

If the default is due to a balloon payment not being made when due, the lender can require full payment on the entire outstanding loan as the only way to cure the default. If the default is not cured, the lender may direct the trustee to sell the property at a public sale.

In cases of a public sale, a notice of sale must be published in a local newspaper and posted in a public place, usually the courthouse, for three consecutive weeks. Once the notice of sale has been recorded, the property owner has until 5 days prior to the published sale date to bring the loan current. If the owner cures the default by making up the payments, the deed of trust will be reinstated and regular monthly payments will continue as before.

After this time, it may still be possible for the property owner to work out a postponement on the sale with the lender. However, if no postponement is reached, the property goes on the block. At the sale, buyers must pay the amount of their bid in cash, cashier’s check or other instrument acceptable to the trustee. A lender may “credit bid” up to the amount of the obligation being foreclosed upon.

With the recent attention given to foreclosure, there also has been corresponding interest in buying foreclosed properties. However, caveat emptor: buyer beware. Foreclosed properties are very likely to be burdened with overdue taxes, liens and clouded titles. A buyer should do his homework and ask a local title company for information concerning these outstanding liens and encumbrances. Title insurance may or may not be available following a foreclosure sale and various exceptions may be included in any title insurance policy issued to a buyer of a foreclosed property.

Your local title company will be happy to provide additional information.

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"Ernest handled our purchase flawlessly. Best realtor experience we’ve had in our many transactions over the years. Responsive, provides great insights, recommendations for all that is needed and he truly cares!"
Ernest did an amazing job listing and selling my cabin in 1 day. He kept me informed along the process and helped me address the 2 inspection issues. His knowledge of the market, his responsiveness to my questions and communication of the process exceeded my expectations.
Ernest is honest,, forthright, patient, attentive, flexible, knowledgeable, a client advocate, and on top of all the details from beginning to end of the real estate transaction, and the BEST REALTOR we have ever worked with. Ernest kept the complicated buying process on track. We are very appreciative of his expertise. We would recommend him highly.-- buying or selling!!
My husband and I have purchased several homes, over the past 30 years. Ernest Matkin, is by far, the best Realtor we have ever had. (and we have had some great ones) He truly cares, and is very efficient. Since we are a couple hours away, from the property we purchased; he stepped in for the walk through, home inspection, carpet cleaners, and the list goes on and on. I highly recommend Ernest!!
We first met Ernest upon recommendation of my brother and his wife. Ernest was actually representing the sellers when they bought a property. He made such an impression during their purchase that they referred him to us when we needed a realtor. In the beginning, he showed us several properties that we were interested in and never pushed or swayed us to buy. It took us a couple months to find a cabin that worked for us and Ernest was extremely patient. We told Ernest it had been 30 years since we had made a real estate purchase and would be counting on him to assist us thru each step (AND HE DID). We live 300+ miles away in New Mexico and Ernest was always there for the appraiser, inspector, and anyone else that needed access. He was always quick to point out any problems that he thought need to be addressed. Looking back on the process from beginning to end Ernest was always on top of everything. We never had to ask for information because it was usually provided to us prior to needing it. Ernest even scheduled a couple contractors to come over and fix some small issues that needed attention before we moved in. We would highly recommend him to anyone needing a realtor.
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