Thousands of homes in the United States are foreclosed on every year. After foreclosure proceedings have been completed, most of these homes end up for sale in a foreclosure auction. So how does a foreclosure auction work? Continue reading below to learn everything you need to know about foreclosure auctions.
How Do Homes End Up in Foreclosure?
Homes can end up in foreclosure for several reasons, including:
- Loss of Job/Income
- Rising Cost of Living
- Payments Are Too High
- Insurance Cancelled
- Death in the Family
- Health Issues
- Cost of Home Repairs
Though a there’s a stigma attached to home foreclosure, it’s a problem that’s more common than you may think.
What Is Home Foreclosure?
What is home foreclosure? Simply defined, the foreclosure process begins after a home owner has fallen behind on their mortgage payments. Though time frames may vary, the foreclosure process generally begins after the fourth missed mortgage payment.
The foreclosure process begins with a Notice of Default, or “NOD”. A Notice of Default is typically issued a month after the fourth missed mortgage payment. Once the notice has been issued, the home owner will typically have 2-to-3 months to get current on the mortgage. This time frame is known as the reinstatement period.
If the home owner does not get current on the loan during the reinstatement period, a foreclosure sale date will be set and a Notice of Sale will be issued. This notice will be issued to the owner and posted on the home. The notice is also published in the county recorder’s office.
In all, the entire foreclosure process can take up to a year, if not longer.
How Does A Foreclosure Auction Work?
After the Notice of Sale has been issued and a date has been set for an auction, the home will be auctioned off at a Trustee Sale. The auction, or sale, typically takes place on the steps of the county courthouse.
The auction begins with the foreclosing lender setting an opening bid. This figure is usually determined by the amount owed on the home, plus interest and any other fees associated with auctioning the home.
The home will then be sold to the highest bidder at the auction. The winner must place at least a cash deposit on the property immediately and pay the rest of the remaining balance within 1 day. Once paid, the high bidder will be issued the deed to the home.
There are some instances in which the opening bid is not met. If no one makes an offer on the home, it becomes real estate owned.
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