Foreclosure - Understanding the Process

Monday, March 12, 2007
Contributed by: Thomas Clayton Feighny

Foreclosure sales always occur on the first Tuesday of each month at the courthouse steps or other designated location chosen by the county for the auction. A real estate investor would simply show up, wait for the properties in which they are interested to make it to the auction block, and begin the bidding process.

Most likely, other bidders on the property would include the bank that made the loan on the property and junior lien holders, including judgment creditors. The problem the real estate investor faces is that the bank wants to get paid, the junior lien holders want to get paid, and the homeowner does not want to lose his house. So, the prospective investor has to outbid all of these people in order to keep the property. As a result, the investor may pay significantly more than planned.

But, luck lies with those who persevere. It often happens that properties fall through the cracks, the bank doesn't show up, a debtor simply gives up and walks away from the home. If the stars are in alignment, money can be made.

The only true way to make money in this system is to constantly mind the foreclosure roles of the county and state, to make frequent trips to properties listed as going into foreclosure, and to inspect the property and title background of the properties. This process results in numerous failures, but a savvy investor can play the game long enough and make a pretty penny. Because there are so many traps for the unwary in this process, it is only prudent for an investor to work closely with an attorney to assist in this process, especially in resolving title questions and understanding how outstanding liens will affect the property.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.