Novice short sale and other real estate investors are often confused by the entire process; it's not your fault! Foreclosure has never been simple but with the current backlog and other pressures, it's become worse than ever.
Here to help is an easy to read foreclosure process timeline. It will help novice investors understand the different methods used to purchase short sale, pre-foreclosures and foreclosed properties.
- First month missed payment. This counts as day one for the bank but notice, the homeowner had 30 days just like normal to come up with a payment. They will always remain 30 days ahead of the bank schedule.
- Second missed mortgage payment…day 30 for the bank.
- Third missed mortgage payment…day 60 for the bank. The loan is now seriously delinquent.
- Notice of Default…usually sent around day 70. If the homeowner doesn't send payment within 30 days, the foreclosure process will begin.
- Notice of foreclosure…day 100. If the homeowner did not make payment the formal paperwork is now filed with the clerk of the court. An itemized list of fees, charges and payments are included.
- Notice of Trustee Sale is published. This typically takes place around day 160 for the bank.
- Loan Acceleration. Prior to the auction/sale, the homeowner may still pay back the amount owed plus fees.
- Second Notice of Sale. The lender is legally obligated to run another notification of the sale prior to the auction.
- Sale or Auction. This normally takes place roughly 180-190 days from the start of the first delinquency (ie, six months), however, due to the large number of foreclosures and the desire of banks to manage the number of defaults, many homes are now taking as long as two years to complete this entire process resulting in an extensive amount of savings for many homeowners who haven't been required to make payments for up to two years.
Investors are often accused of taking advantage of a bad situation but banks, buyers and homeowners often benefit from a short sale. Not only have many homeowners had a change to substantially increase their savings without having made a mortgage payment for months or even years, but banks typically realize greater gains and may save the cost associated with the extended process associated with a full foreclosure.