Foreclosure Lesson #7 - Types of Foreclosures

There are many types of foreclosures, so we will start by defining foreclosure. A foreclosure is a legal process in which a lender sells or seizes a person's property to recoup and repay the debt attached to that parcel. When this happens, there are a few crucial steps.

First, the lending institution notifies the owner in writing that they are in default of payment. This is known as the Notice of Default (NOD). After 3 consecutive payments are missed, the lender will bring in an attorney and the attorney will send a letter. If no payments are made, the lender may request to have the property sold at auction.

The first type of Foreclosure is a Judicial Foreclosure. This is when the lender brings a lawsuit against the borrower. It starts with a summons and complaint served upon the borrower. If the borrower doesn't respond or pay the fees, the lender gets a judgement by default. The lender must advertise a notice of sale in the newspaper for a certain period of time, then the public sale is conducted and the property goes to the highest bidder.

The second type of Foreclosure is a Nonjudicial Foreclosure, also known as a power of sale. This is when the borrower gives a deed of trust to a trustee to hold for the lender. Upon default, the lender simply files a notice of default and a notice of sale, which is published in the newspaper. It then gets sold to the highest bidder.

The third type of foreclosure is a Strict Foreclosure. In this scenario, there is no sale required.
The borrower has a certain amount of time to pay what is owed. After that date, the title reverts to the lender.

Check with your state to find out which foreclosures are practiced. Virginia only does Judicial and Nonjudicial Foreclosures. Its about a 45 day process, and the lender is only required to advertise the sale for 14-28 days. Of course, there are a multitude of ways to find foreclosures, not just the newspaper. Depending on the interest I get from these articles, I might get into that as well. Good Luck!

Charlottesville Real Estate