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Home > Finance > Investing > Indtroduction to foreclosure investing
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Indtroduction to foreclosure investing
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Foreclosure is the legal proceeding in which a bank or another
creditor sells or repossesses real estate due to the owner's failure to
comply with an agreement between the lender and borrower ( the 'deed of
trust'). Commonly, the violation of the mortgage is a default in
payment of a promissory note, secured by a lien on the property. When
the process is complete, it is referred to as “the lender has
foreclosed its”.
There are two sorts of foreclosure in most common law states. Using a
“deed in lieu of foreclosure” the bank claims the title and possession
of the property in full satisfaction of a debt, usually on contract. In
the proceeding known as foreclosure , the property is auctioned by a
county sheriff or some an officer of the court. The sheriff then issues
a deed to the winning bidder. Banks and other institutional lenders
typically bid in the amount of the owed debt at the sale, and if no
other buyers step forward the lender receives title to the immovable
property in return. Some states have adopted non-judicial foreclosure
procedures, in which the mortgage, or more commonly the mortgage's
attorney or designated agent, gives the debtor a notice of default and
the mortgage's intent to sell the property in a form prescribed by
state statute. This type of foreclosure is commonly referred to as
“statutory” or “non-judicial” foreclosure, as opposed to “judicial”.
With this “power-of-sale” type of foreclosure, if the debtor fails to
cure the default to stop the sale, the mortgage or its representative
will conduct a public auction in a similar manner as the sheriff's
auction. The highest bidder at the auction becomes the owner of the
immovable property free and clear of any interest of the former owner
but the property may be encumbered by any liens superior to the
mortgage being foreclosed (e.g. a senior mortgage, unpaid property
taxes etc). In some cases further legal action, such as an eviction may
be necessary to obtain possession of the premises.
Strict Foreclosure is an equitable right available in some states. The
strict foreclosure period arises after the foreclosure sale has taken
place and is available to the foreclosure sale purchaser. The
foreclosure sale purchaser must petition a court for a decree that will
cut off any junior lien holder's rights to redeem the senior debt. If
the junior lien holder fails to do so within the judicially established
time frame, his lien is cancelled and the purchaser's title is cleared.
This effect is the same as the strict foreclosure that occurred at
common law in England's courts of equity as a response to the
development of the equity of redemption.
In most jurisdictions it is customary for the foreclosing lender to
obtain a title search of the immovable property and to notify all other
persons who may have liens on the property, whether by judgment, by
contract, or by statute or other law, so that they may appear and
assert their interest in the foreclosure litigation. In all US
jurisdictions a lender who conducts a foreclosure sale of immovable
property which is the subject of a federal tax lien must give 25 days'
notice of the sale to the Internal Revenue Service : failure to give
notice to the IRS will result in the lien remaining attached to the
immovable property after the sale. Therefore, it is imperative that the
lender obtain a search of the local Federal Tax Liens so that if the
persons or companies involved in the foreclosure have a federal tax
lien filed against them, the proper notice to the IRS will be given.
Some individuals and companies are engaged in the business of
purchasing properties at foreclosure sales. A number of companies
promoting themselves on the internet and in other advertising media
have sprung up touting the profits that can be made buying properties
in foreclosure. Purchasing properties in foreclosure can be a “risky
business” and should not be attempted by the uninformed. Read books on
foreclosure investing and purchase a good foreclosure investment
software to protect yourself from buying the wrong foreclosure
properties.
For more information Visit www.sharkbaitsoftware.com |
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