Even if there are some differences in the foreclosure process of every state, a homeowner or a potential buyer has to be familiar with the procedure to be able to made intelligent and informed decisions.  The process may differ slightly depending on the city where the property is located so it is advisable to be aware of the specific laws for your location and to ask for advice from the experts when you are involved in a foreclosure process.

The foreclosure process normally requires approximately six months from the time when the homeowner had officially defaulted until the property is repossessed by the bank or lender.  The pre-foreclosure period often begins 30 to 60 days after the homeowner had neglected one to two payments for the mortgage.  During this period, the lend sends a Demand Letter to the borrower, requiring the outright repayment of the debt, including the associated late payment penalties and legal expenses.  The foreclosure process is then legally started after the homeowner is unable to comply with the requirements of the Demand Letter after a specific time period, which is normally 30 days.

The next step for the bank or lender is to issue a Notice of Default (NOD), which is sent to the homeowner as a certified letter that indicates the total loan amount and possible strategies for getting the loan back on track.  The foreclosure notice is recorded in the proper local government agency, the auction is scheduled, and a notice is published in the newspaper serving the city or region.  During this period, possible buyers usually approach the homeowner for a short sale although this may also occur during the pre-foreclosure stage.

The foreclosure process may be a a power of sale or a judicial sale.  In the judicial sale, the court takes part in the procedure, but in the power of sale, it is the lender who undertakes the whole process although a judicial review may be conducted to make sure that the steps taken are completely legal.  At the auction, the opening bid established by the lender and this is usually equal to the unpaid debt, legal fees, interests and other fees.  The property is bought back by the lender if there is no buyer for it during the auction and it therefore becomes real estate owned or REO.  For home buyers or investors, purchasing an REO property offers them the advantage of being sure that there are no liens, including tax liens, because the bank takes care of them before listing the home as REO.

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