Why invest in the foreclosure scene? First of all, you get discounted pricing. It’s also speedy purchases and there’s often wonderful profit opportunities if purchased correctly. The main thing I love about investing in foreclosure properties at a trustee sale or sheriff’s auction is that in most markets you buy today, you own today. That’s pretty rapid money.
In your own market, you need to make sure that you check to determine that if you buy today, you own today. In some markets there is a redemption period that the homeowner has. I’ve heard that some states have a right of redemptions as long as six to 12 months, or like in my state it’s 21 days. So make sure you’re careful. You may buy and not be able to do anything with that property for several months.
Know what you’re doing before you go to the auction. That begins by researching the property at the County Recorder’s Office. Before we go any further, I will give you a word of caution about some of these online resources that will give you the notices of default, the notices of share of sale, or the lis pendens filings. Don’t use them unless the data is being pulled, in real time, directly out of the county courthouse. Whenever you use one of these other aggregators of data that’s reselling that content, you will find that there is typically anywhere from an eight to a 28-day lag from the me that it becomes public record to the time that it shows up in your dashboard. The best way to get the data is to go direct, be the first person there, and get it as it’s being recorded. Success in foreclosure, as well as pre-foreclosure, is to be the first person there. Which means you have to have the freshest data.
Non-Judicial Markets. Because of the power of sale clause in the mortgage document, the lender is able to foreclose on their property without going through court proceedings. This is in the western states and the non-judicial foreclosure filing which begins with a notice of default.
If you are in an eastern state, you are dealing in a judicial foreclosure process, with the lis pendens filing. Auctions are held by the sheri at a sheriff’s sale. The lender initiates a lawsuit by filing the complaint with the court. This is called a lis pendens or Latin for lien pending, and the court then determines that the lender can foreclose on the property.
Once the loan is 30 days delinquent, the bank is going to begin to send a series of collection letters. The first collection letter is pretty nice, because they are giving the homeowner the benefit of the doubt. It says things like, “You must have forgotten or perhaps you’ve been on vacation, but we have not yet seen your payment for this month.”
If the homeowner goes 60 days, the language of the le er gets a little more intense, “We have been attempting to contact you now for several days. We’ve called you, emailed you, texted you, sent you letters and we’ve heard nothing back. We’re growing concerned. Please contact us and let us know your intentions.”
By day 90, the language gets real scary and intimidating. They say, “You have not contacted us and now we’re going to hire an attorney and go through the foreclosure process.” At 90 days, it will be referred to a foreclosure attorney and the foreclosure action will begin.
So, in a non-judicial foreclosure state you typically have 90 days from the point that you missed your first payment to the foreclosure action being filed. The foreclosure action then takes 90 days, which is what’s called the right of redemption. In this 90-day period of me, you can simply reinstate your loan with the bank by paying the amount that you are behind on.
On day 91, you go into a notice of sale. The property will be advertised for three consecutive weeks, at which point you can only bring in the full amount owing, the total mortgage plus the arrears to own your property again. Otherwise, it will be set for sale and sold one to two weeks after the three-week period. So, you’re looking at 90 days non-payment and another four and a half months before the actual sale, or about seven and a half to eight months before a bank can foreclose and take back possession of real property.
To Your Success;
Lee A. Arnold
CEO
The Lee Arnold System of Real Estate Investing
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