A home is usually identified as a pre-foreclosure home when the homeowner becomes at least 90 days late on their mortgage payment and has been given a notice of default, also called a Notice of Trustee Sale issued by their Mortgage Company. This window of time varies from state to state but typically lasts until the homeowner either brings the loan current, successfully completes a short sale or the home is sold at a Trustee Sale auction.
Keep in mind only 13 states including Arizona process foreclosures through a Notice of Trustee Sale. All other states use the judicial process which will not be discussed at this time.
The pre-foreclosure is evidenced by a Notice of Trustee Sale which is a public notice indicating the lender or mortgage holders’ intent to sell the property either to a third party or by repossessing the property themselves and selling the home at a later date. This type of action is generally initiated by the first mortgage holder but additional lien holders can foreclose including but not limited to homeowners associations, contractors who have not been paid or the County Assessor for unpaid property taxes.
Once a Notice of Trustee Sale has been filed with the courts, the homeowner has a 90 day window of opportunity to reinstate their loan, negotiate a possible loan modification with the Mortgage Company, sell the property via a short sale or simply let the property foreclose and revert back to the Mortgage Company or bank.
A homeowner who is facing pre-foreclosure should consult with a Real Estate attorney about the possible ramifications of all the above mentioned scenarios. Bankruptcy is also a possibility for a delinquent homeowner as this sometimes will hold off a trustee sale for a limited amount of time. Individual circumstances are different for everyone so legal advice is a must.
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