How does the foreclosure process work?

[Juan Vargas]

I’m new to the real estate world and taking a tour of each creative way to obtain real estate. Wondering how this process works. 

[Marty Boardman]

As Chris pointed out, there are judicial and non-judicial foreclosures. I buy foreclosures in Arizona (non-judicial) and Wisconsin (judicial).

The big difference between the two is that in non-judicial states the process is MUCH faster. It's governed by state statute (so the timelines are firm). For example, in Arizona when the notice of trustee's sale is filed the borrower has 90 days to bring their loan current (or pay it off in full) to stop the foreclosure.

In states with a judicial process, the timeline is dictated by the courts. There are judges involved and their calendars can get booked out far in advance. It's common to see a house in a judicial state linger in foreclosure for 2-3 years or more.

There are 3 phases of foreclosure:

1. Pre-foreclosure (this is the period of time between when the borrower is first notified they're in foreclosure and the auction date)

2. Auction (the sale of the property at the courthouse steps or in an attorney's office to the highest 3rd party bidder)

3. REO (now a bank-owned home because no 3rd party bidders purchased the property at auction)

I agree with Chris that overall foreclosure numbers are down the past few years, but they are not "rare". I've bought over 50 properties the past 3 years in pre-foreclosure and at auctions in Arizona and Wisconsin. If you understand how the process works and have the skill/desire there are a lot of opportunities there for you Juan.

Good luck!