FORECLOSURES, BANK OWNED, & SHORT SALES

The foreclosure process begins when a financial distressed homeowner fails to make a loan payment and is served with a summons from his or her creditors. After service, papers will be filed with the county clerk's office and be made a matter of public record. On completion of the publication process, the foreclosure action will be permitted to proceed and the owners have a limited amount of time to pay up, sell, or make other deals with creditors. If none of these actions are taken, a foreclosure sale will take place. If no one bids the amount owed, the property reverts to the lender and becomes an REO (real estate owned) property held in inventory by the lender.

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.