In the foreclosure sales market a lot has happened quickly. In the process, the meaning of “pre-foreclosure” and all the other associated terms have gotten a little skewed. We’ve put some definitions together that will help to clarify these very distinct foreclosure phases:
Pre-foreclosure – A home is in pre-foreclosure from the time of the initial mortgage payment default up to the point when the distressed property is actually sold. (Different states dictate different lengths of time.)
Notice of Default (NOD) – This is the notice sent to the borrower from the lender officially informing them that they have defaulted on their mortgage. This is the point when the foreclosure process actually begins.
Reinstatement Period – This is the period of time given to the borrower in which the borrower may restore their standing with the lender by making the back payments. The amount of time the borrower has to successfully reinstate is given in the NOD.
Short Sale – This occurs when a home owner owes more money on their home than they can gain in a traditional sale and is either unwilling or unable to make up the difference at the closing. This very specific process can be conducted with the aid of an experienced and licensed Realtor to work with the bank and the buyer to forge an agreement to sell the home for less than is owed.
Notice of Sale – If the borrower cannot reinstate the loan by the period defined in the NOD, a notice of sale is recorded that advises the date and location of the foreclosure sale.
Foreclosure Sale – The property is auctioned to the highest bidder.
Redemption Period – This is a period of time granted to the home owner that allows them to regain their property after the foreclosure sale. They must pay all costs including interest owed and the sale price of the home. Not every state provides this opportunity, but the redemption period in Florida is 10 days from date of foreclosure sale.
Real Estate Owned (REO) – If a foreclosure sale is not successful, then the property defaults to the lender.
Short sales can provide tremendous opportunities for buyers to get a deal and for sellers to avoid foreclosure, but they require close monitoring to be executed effectively. Please feel free to contact us if you have any questions about your specific situation.