NOTES with Jay Conner Success
UNDERSTANDING THE FORECLOSURE PROCESS
W hen Carol Joy and I a system of buying foreclosures that made $456,000 in six months. To this day, foreclosures make up 25 percent of the deals we close. I have spent a lot of time teaching my students how they should use foreclosures in their real estate investing strategies, and there are many misconceptions people have about what the foreclosure process is. In this article, I want to make sure everyone understands what foreclosure is and what the process looks like from beginning to end. Preforeclosure started our business 15 years ago, we created
“I have spent a lot of time teaching my students how they should use foreclosures in their real estate investing strategies, and there are many misconceptions people have about what the foreclosure process is.”
do this by having notice of default or a summons delivered to the property owner.
Stage 1 of the foreclosure process is what we call preforeclosure. This is when the owner of the property has fallen behind on their payments. There are federal laws in place that prevent the banks and mortgage companies from beginning the foreclosure process until the borrower is at least 90 days in arrears with their payments. If the account is not brought current, the lender moves on to the next step in the foreclosure process. Substitute Trustee and Summons Once the lender, be they the bank or the mortgage company, pulls the trigger and officially begins foreclosing on a property, they hire a substitute trustee. The substitute trustee usually comes from what we call a “foreclosure millhouse,” which is a large law firm whose only focus is representing banks and mortgage companies to handle the foreclosure process. It’s the substitute trustee’s job to begin the foreclosure process, and they
This summons is not delivered through the mail. It’s actually delivered by the deputy sheriff in person. They physically go the property and knock on the door. If someone comes to the door, they hand them the notice of default. If no one is there, the deputy sheriff will tape it on the door. At this point, the property is in foreclosure. Now, the borrower still owns the property. There’s a period of time after the notice of default during which the borrower can still make good on their payments and stop the foreclosure process. Hearing In most states, the next part of the foreclosure process is what’s called a hearing. During the hearing, the clerk of court goes through a whole checklist to determine if the bank has the legal right to foreclose on this property. If they find that, yes, the bank can foreclose on the property, then they move forward to the next step. Continued on page 3 ...
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