How Does Foreclosure Work in Real Estate?

What does foreclosure mean? What is the foreclosure process? What's the difference between foreclosure vs short sale? These are just a few common questions circling foreclosures.
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In this video, Robert Rico shows you what a foreclosure is and the foreclosure process.

So, what is a foreclosure?

A foreclosure is the repossession of a home when a loan borrower defaults on their home loan. In other words, foreclosure describes the process of when a bank (or another trustee) collects a loan's collateral.

There's a lot to know about the foreclosure process. So, Robert breaks down the process in a timeline.

To purchase a home, a home buyer might need a loan. So, they will go to a bank (or other loan company) to take out a loan. What the home buyer withdraws is a home loan. This loan is given to the borrower with the promise that the borrower will pay back the trustee with monthly payments.

So, what happens when the borrower doesn't make a payment because of financial difficulties, such as an economic recession?

When the borrower does not make a payment, the trustee will send a note of default. A notice of default is to notify the borrower that they have defaulted on their loan. This will mark the beginning of the foreclosure process, which is also known as "pre-foreclosure."

If no solution has been made after 90 days, then the bank will send a notice of trustee sale. This is a declaration that the property will be auctioned off in a specified period of time. This is the foreclosure. The home buyer who took out the loan was unable to make payments on the loan, so the bank had the legal right, per the promise that the borrower repays them, to take them home.

So, what are your solutions to a foreclosure? Robert Rico share the options in this video.

Chapters:
00:00 - Introduction
00:58 - What is a promissory note?
02:30 - What is pre-foreclosure?
04:53 - What are the pre-foreclosure options?
06:00 - What is foreclosure?
08:00 - What is the foreclosure timeline?
09:27 - Final Thoughts

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