Foreclosure is a legal process in which a homeowner is unable to make his mortgage payments, so the lender seizes the property (which was pledged as collateral for the loan) with the intent to sell it, as stipulated in the terms of the mortgage contract.  The lender attempts to sell the property (to recoup his money) since the homeowner has defaulted on the mortgage note.

The foreclosure process has several stages, in which the homeowner has the opportunity to bring the loan current and avoid foreclosure.  Typically, after three months of missed payments, the lender issues a Notice of Default to the borrower, informing him that he is facing foreclosure.  This notice is public record – and is recorded at the county recorder’s office. The Notice of Default starts a reinstatement period that usually runs until five days before the home/property is auctioned off. If the mortgage loan is not brought current within three months, a foreclosure sale date is determined.  The borrower will receive a Notice of Sale, and this notice will be posted on the property and recorded at the county records’ office.

Assuming the mortgage default is not corrected, the home/property will be auctioned off on the county courthouse steps.  The time and location of the auction are listed in the Notice of Sale.  The property is sold to the highest bidder at the auction, and the winner must pay the winning bid in cash.  Usually the winning bidder pays a cash deposit upfront, with the remainder due in 24 hours.  Once full payment is received, the winner receives a deed to the property. At the auction, if the property does not sell (or if the opening bid is not met), then the property is classified as an REO – Real Estate Owned.  Many REO properties available for sale at foreclosure auctions are worth much less than the total amount owed to the lender/bank.

If you are facing foreclosure, consult with an experienced attorney who can explain what options you have to halt or stop foreclosure.