The Steps of a Foreclosure

After last week's post about short sales, it begs the question about what the difference is between a short sale and a foreclosure. And, with all the media attention to the rise in foreclosures, especially here in the Bay Area, I thought it would be helpful to look at the steps of a foreclosure.

Now, bear in mind that the foreclosure process is very complicated and varies quite a bit in every situation. This is just a rough overview of a typical foreclosure in California.

One main difference between a short sale and a foreclosure is that a short sale is initiated by the homeowner, usually in an attempt to avoid the foreclosure process. A foreclosure is started by your lender because you haven't made good on your promise to pay them back. Remember when you got that home loan? The security for the loan was the home. So, if you don't make your home loan payments on a regular basis, they have the right to "foreclose," or take the home since they aren't getting their money back.

The first step in the process (other than NOT making your payments, of course) is the Notice of Default. The good news here is that the lender must give you 90 days at this point to make good on your debt. They also must publish the Notice of Default (usually in the classifieds of a local newspaper) and file the Notice with the county recorder's office.

If the 90 day period passes, and you have not caught up in your payments or made other arrangements, that triggers the Notice of Sale. This legally allows the lender to sell the house, and it gets harder and harder for you to get caught up on your payments. The lender can sell the house 21 days after the Notice of Sale.

If the lender makes any missteps along the way of the process, it has to start over from the beginning. And, due to negotiations that may happen between you and your lender, this whole process could actually take anywhere from 4 months to 48 months. Like I said above, every foreclosure is unique and complicated.

Should you be worried about the wave of foreclosures? Probably not too much, unless you are in a bad loan situation and can't make your payments. While the San Francisco Chronicle and other media are talking about the rising number of foreclosures (And they are indeed going up), here is a bit of perspective on foreclosures. In the month of September there were 157 foreclosures in Alameda County, but the other day there about 4900 properties for sale in Alameda County. So, barely 3% of that is foreclosures, which is not very significant.

I said it before and I'll say it again, foreclosures are complicated and every one is different. If you have questions about the foreclosure process, or maybe about buying a foreclosure property, let me know. I'm always happy to help. I can be reached at 510-547-5970 x57 or MSmartt@jps.net.