What is Foreclosure? What you should really know

Foreclosures are those properties which have been forfeited by the government or the banks from the owner of the property because of the non payment of the Taxes, Utility bills or the installment of the loan taken on that property. The properties which are included in Foreclosures are House, Land, Plot, Shop, Building, Apartment, etc.

Types of Foreclosure

There are many types of Foreclosure, but two of main foreclosures which are mostly used in USA are judicial sale and Power of Sale.

Judicial Sale - In Judicial sale the Court is interfered to supervise in the matter of foreclosure. The Court informs all the people linked to the sale of the Foreclosure such as the mortgager that is specially the bank, the lien holders, the owner, etc. Then will all legal actions the parties are notified to come on a mentioned date to the court for the hearing. If any of the parties are not satisfied with the ruling a case can be filed in the Federal court.

Power of Sale – In Power of Sale the Mortgage holder of the property which is commonly the Bank has the right to sale the property to anyone or by means of Auction without the inference of the Court. Only the house owner is notified of the Foreclosure. The Bank looks for the highest bid amount. When someone finally agrees to purchase the property, the bank subtracts the interest amount and the amount of mortgage and the rest of the money is given to the purchaser.

The bank gives the loan to people and keeps the files of the property on which the load is getting sanctioned as a Security purpose. This means that the property is mortgage. The person taking the loan is known as borrower. The Bank gives the money on monthly installment basis which includes the money of the loan given plus the interest which the bank has fixed every month from the borrower. The bank which gives the loan is known as the Lender.

When the borrower is unable to pay the installment set by the bank which consists of loan and Interest for about the mentioned time which is normally a period of three months, then the bank is fully authorized to forfeit the property and it can be sold to any one if they have a buyer or the property is Auctioned to get the highest bid possible.

It’s up to the purchaser to clear the entire loan on the property by paying it off or the purchaser also has the right to keep the property in the same condition by paying the same amount of installment every month which was asked by the bank before. If the purchaser wishes clears the loan amount of the bank, in return the bank will be giving the documents of the property to the new purchaser. The purchaser can later transfer the ownership of the property on his name if he wishes.