Foreclosure Real Estate

What is a foreclosure?

A foreclosure is a legal action that permits a lender to acquire ownership and title from a delinquent borrower.

The Types of Foreclosure

There are two types of foreclosure systems that follow the two types of secured real estate loans.

bullet There is a judicial foreclosure system in Mortgage States.
bullet There is a non-judicial foreclosure system in Trust Deed States.
bullet A few states allow both Judicial and Non-Judicial foreclosures depending on the loan documents.

Length of Time Pre-foreclosure

The length of time from commencement of the legal action to the legal sale of the property varies greatly from State to State. See below. This is broken down into the time it takes to process the documents through the legal system and the number of days notice one must give of the sale by publication.

Length of Time Post-foreclosure, redemption period

A redemption period enables a borrower to pay off the loan and re-claim the property for a period AFTER the foreclosure sale. In some cases an owner of an underlying junior lien or mortgage also has this right. These times also vary greatly from state to state. From zero to about a year! This delay greatly affects your ability as an investor to take title to, fix up and rent or re-sell a foreclosure property. And for the lender to try to recover some of their money!

IRS liens

The IRS, by virtue of Federal law, has 120 days to redeem property. In practice they seldom do this as this means writing a check to the buyer. Sometimes they will agree to waive this redemption period.

Disclosure

We are not attorneys are cannot give you legal advice. We believe this information to be accurate, but please check with a qualified real estate attorney in the state in question before making any decision based on this information.

Our intent is to give you an overview and make you aware that laws differ, sometimes dramatically, from state to state. You should of course be aware of the foreclosure laws in your own state and that of any other state that you plan to lend in.

The states strike differing balances between protecting the homeowner from losing their home quickly, perhaps because of a temporary financial crisis on the one hand, and the legitimate rights of the lender to try to recover the money they have lent in good faith expecting to be paid back! How long should a borrower be permitted to live in a house without paying a dime in mortgage payments? I guess that depends if you are the borrower or the lender!

Conclusions

Non-judicial sales are almost always quicker than judicial sales. Lenders should always make sure their documents provide for this if possible in that state.

Some states are much more lender-friendly than others. It would be interesting to know if interest rates are lower in those states than in those like New York that drag out foreclosures for so long, costing the lender money and lost income.

State by State Foreclosure Rules

State Judicial or non-judicial Process days Sale Publication days Redemption period Notes
Alabama Both 49-74 21 365 days Usually non-judicial
Alaska Both 105 65 365 days judicial only Non-judicial requires 30 days default
Arizona Both 102 41 up to 6 months Junior lienholders can also redeem
Arkansas Both 70 30 365 days judicial only Property must be sold for 2/3 appraised value
California Both 117 21 365 judicial only Non-judicial more common.
Colorado Non-judicial 91 14 75 Judicial foreclosures not usual. Lender must still obtain a court order after sale is scheduled.
Connecticut Judicial 62 N/A Judge decides Winning bidder at foreclosure auction has 30 days to pay. Type of foreclosure depends if equity in property.
Delaware Judicial 170-210 60-90 None. But borrower could contest the sale. Sale can be held at courthouse or property by sheriff.
DC Non-judicial 47 18 None. Sale conducted by licensed auctioneer, usually at their office.
Florida Judicial 135 NA None Sale date about 30 days after judgment. If borrower cannot be served in person, guardian at litem must be appointed. Sale by clerk of court.
Georgia Non-judicial 37 32 None No right to reinstate mortgage.
Hawaii Non-judicial 220 60 None
Idaho Non-judicial 150 45 365 judicial only, otherwise none
Illinois Judicial 300 NA 90 Court has to confirm sale after full bid price paid.
Indiana Judicial 260 120 None The pre-foreclosure delay depends on the age of the mortgage.
Iowa Judicial 160 30 20-365 Redemption time depends on various factors, including whether or not the lender has waived a deficiency judgment.
Kansas Judicial 130 21 90-365 365 days redemption if 1/3 of principal has been paid
Kentucky Judicial 147 NA 365 Lender can re-possess immediately if house abandoned. Redemption period only if house sells for less than 2/3 of appraised value.
Louisiana Judicial 180-270 NA None Two types of foreclosure. Ordinary and executory. Executory quicker and requires authentic act that includes borrowers confession of judgment.
Maine Judicial 240 30 90 Lender must serve default notice on borrower. Borrower has 90 days after judgment to stay in house and pay off mortgage.
Maryland Judicial 46 30 Court decides No need for lender to inform borrower of foreclosure until sale date is set by court. Sale conducted by licensed auctioneer.
Massachusetts Judicial 75 41 None Must get ruling from land court that borrower not protected from foreclosure by Soldiers and Sailors Relief Act. Borrower entitled to any surplus if property sold for more than loan amount. Licensed auctioneer sells.
Michigan Both 60 30 30-365 Usually non-judicial. Sheriff sells property.
Minnesota Both 90 7 180-365 Usually non-judicial. Usually 180 redemption period. But depends on property type and wording of mortgage.
Mississippi Both 90 30 None. Usually non-judicial. Trustee sells property. Surplus of sale proceeds goes to secondary lenders.
Missouri Both. 60 10 365 Usually non-judicial. Borrower must be served notice of default. Redemption allowed only if the lender was the successful bidder. Cumbersome procedure for redemption.
Montana Both 150 50 None Usually non-judicial. Trustee sells property. No deficiency judgment allowed.
Nebraska Judicial 142 NA None Non-judicial much quicker. Needs Deed of Trust. With non-judicial, borrower has 30 days after being given notice to reinstate loan.
Nevada Both 116 80 None Non-judicial much more common. Lender begins foreclosure by filing notice with court and mailing borrower.
New Hampshire Non-judicial 59 24 None Most mortgages require lender to give borrower 30 days notice of default. Sale usually at the property.
New Jersey Judicial 270 NA 10 30 days written notice given to reinstate mortgage. Sale at courthouse by sheriff.
New Mexico Judicial 180 NA 30-270 Winning bid must be at least 80% of fair market value of property. Usually 30 days for borrower or other lien holder to redeem.
New York Judicial 445 NA None Need a court ruling that can take 7-9 months. The sale set for 4 months later.
North Carolina Both 110 25 None Non-judicial more common. Sheriffs sale. Borrower given 10 days notice of hearing before clerk of court.
North Dakota Judicial 150 NA 180-365 Lender must give borrower 30 days notice of intent to foreclose. Borrower can reinstate by making up back payments. Borrower usually has 180 days after the sale to redeem property. Failing which is transferred to bidder.
Ohio Judicial 217 NA None Borrower can be served in person or by certified letter. Advertised if borrower cannot be found. Sales price must be 2/3 of the appraised price. Sheriffs sale.
Oklahoma Both 186 NA 15 Judicial more common. Lender files in court and notice of action served on borrower. Borrower has 20 days to respond. If appraised then opening bid must be 2/3 of appraisal. Sheriffs sale.
Oregon Both 150 30 None-180 Non-judicial more common. Trustee sells. Borrower can reinstate up to 5 days before sale by paying off back payments and costs. No redemption period with non-judicial foreclosure.
Pennsylvania Judicial 270 NA None Cannot start foreclosure till 60 days late. Borrower has 2-4 months to try to solve problem before lender continues. Borrower can prevent sale by paying off full amount owed up to 1 hour before the sheriffs sale.
Rhode Island Both 62 21 None Non-judicial more common. Attorney must give borrower at least 20 days notice before advertising sale weekly for 3 weeks. Auctioneer sells.
South Carolina Judicial 150 NA None-30 Lender files lis pendens in court. With 20 days borrower must be personally served. Borrower has 30 days to respond. Hearing officer handles for court. No redemption period if lender waives deficiency judgment. Otherwise 30 days for another bid to be given.
South Dakota Both 150 23 60-180 Judicial more common. No need to mail default notice, but borrower has 30 days to respond to court filing. Borrowers and lien holders have 6 months to redeem unless property vacant, then 2 months.
Tennessee Non-judicial 40-45 20-25 None-730 Most trust deeds provide no right to redeem. If not included borrower has TWO YEARS. Trustee sale.
Texas Both 50 NA None Non-judicial more common. Lender gives borrower 20 days notice to reinstate. Then can foreclose. Must give borrower 21 days notice of sale. Trustee sale.
Utah Both 110 30 None Non-judicial more common. Foreclosure started by filing notice with court and mailing to borrower. Borrower has 3 months to reinstate. Then must publish sale weekly for 3 weeks. Auction at courthouse.
Vermont Both 95 NA 90 but varies Usually non-judicial. Borrower may reinstate prior to the sale by paying back payments and costs. Borrower receives notice of sale 60 days prior.
Virginia Both 45 14-28 None Non-judicial more common. Borrower gets 30 days notice to reinstate. Lender may pursue deficiency judgment. Trustee sale.
Washington Both 135 90 None Non-judicial more common. Lenders mails notice of default and either personally serves on borrower or posts the property. Notice of sale recorded 90 days before actual sale. Sale advertised twice. For court foreclosures, 1 year right of redemption, otherwise none.
West Virginia Both 60-90 30-60 None Non-judicial more common. 10 days notice to reinstate. May not be able to reinstate if served default 3+ times. Borrower can thereafter pay off entire loan any time before the sale.
Wisconsin Both 290 NA 60-365 Judicial more common. Sheriffs sale. 2 month redemption period with abandoned properties. If property sells for less than judgments, sale will not be confirmed unless court is satisfied fair market value of property is credited to mortgage.
Wyoming Both 60 28 90 Non-judicial more common. Sale published once per week for 4 weeks. Sheriffs sale at courthouse. To redeem must pay winning bid plus 10% interest and property taxes owed

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