The 4 stages of the foreclosure process and a look at the overall 120 day timeline.

Pre Foreclosure:

(1) Foreclosure Homes: Notice-of-default (NOD) - Day 1: The foreclosure process begins on day one with the first notification from the bank to the homeowner that the bank has decided to take action against the homeowner because the homeowner has failed to make two or more regularly scheduled monthly mortgage payments. This first stage in the foreclosure process is notice to the homeowner that their house is in jeopardy and that they must now take action in order to keep ownership of their home. The Notice of Default is delivered to the Homeowner usually by Regular and Certified Mail. This first stage lasts 90 calendar days. The first option is that the Homeowners can immediately pay the full amount of past due payments in one lump sum to cure this default. The bank is not concerned about the source of these funds so long as the full amount is paid. Homeowners often reach out to family or friends for the money, take an equity loan out against the foreclosure home, or sell off other assets in order to make the payment. If the Homeowner cannot make the full payment they may contact the bank and work to negotiate payment terms with the bank to stop the foreclosure on their home. This is often referred to as the Hardship process. The Owner writes a letter explaining the reasons they've fallen behind on the mortgage payments. The lender may also request some back-up documentation like pay stubs or bank statements to verify the story. The bank may allow them to make a larger monthly payment for the next several months in order to satisfy the past due amount. If the Homeowner cures the problem within the first 90 days allotted, then no additional steps are necessary and the NOD and foreclosure problem is gone.

(2) Foreclosure Homes: Notice of Trustee sale (NTS) - Day 91: This is the second stage of the foreclosure homes process. If the Homeowner has failed to make the back payments that were owed and they continue to be behind on other regularly scheduled payments then the lender must file a Notice of Trustee Sale. The foreclosure process requires the bank or lending institution to publish a Notice of Trustee Sale to the public. This document notifies the Homeowner, any other interested parties and the general public that the foreclosure home in question will be offered for sale at public auction to the highest bidder. The lender must publish this notice in a public forum such as the local newspapers three consecutive weeks prior to the set auction date. The sale of the foreclosure homes at auction will then be conducted on the date specified in the Notice of Trustee Sale. This prcoess generally take up the last 30 days of the timeline.

Foreclosure Homes at the Auction:

(3) Public Auction - Day 120; Tpublic sale of the foreclosure home will be held in a public forum where the highest qualified bidder wins title to the foreclosure homes. Bidders qualify by demonstrating to the auctioneer that they are Ready, Willing and Able to purchase the available foreclosure homes on the spot at the auction. Cash or Cashier’s Checks are often required on hand and ready for endorsement to the auctioneer upon winning any given foreclosure home. This is the last step of the foreclosure process. The foreclosure home now has a new owner.

Post Auction:

(4) (REO) or Real Estate Owned Property - Day 121: Foreclosure homes which have  been re-purchased by the bank. Foreclosure homes become an REO when one of two things happen.

First, foreclosure homes may become an REO when the bank’s representative outbids the other qualified bidders and is the resulting highest bidder on the property and thus wins the title to the foreclosure home.

Secondly, foreclosure homes may become and REO when there are no other bidders on the property. This often happens when the amount owed against the property (the opening bid) is more than any present qualified bidder wants to bid on the property, consequently resulting in no bids. The bank is then the winner by default and takes the title to the property for the opening bid amount.

Investors will find huge opportunities on foreclosure homes at every stage of the foreclosure process. It is important to understand the different skills, resources and risk tolerance levels required to compete successfully at each level. Be careful and consult reliable sources before you invest. We have other articles posted here to explain the opportunities found in each of the stages of foreclosures:

http://www.propertyhookup.com/article/22/Investing_in_Pre-Foreclosures.html

http://www.propertyhookup.com/article/16/Negotiating_Directly_with_Sellers.html

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