Steps to a Foreclosure

Greatly simplified, the non-judicial foreclosure process consists of three general steps.


STEP ONE - First "Notice" is Filed (i.e., Notice of Default or Notice of Sale)

STEP TWO - Sale Date Set

STEP THREE - Sale or Auction is Held


STEP ONE: If the lender does not receive loan payments as specified in the deed of trust, it may file a document with the county recorder in which the property is located. The exact document varies by state, but may be a Notice of Default (NOD) or Notice of Sale. The notice must then be mailed to all parties with a recorded interest in the property (or with a recorded notice requiring said notice) via certified or registered mail or both. The borrower is given a specified time frame in which to bring the loan current.

- Some real estate agents specialize in assisting borrowers at this stage of the transaction. A sale of the property may be arranged through which the lender will receive the full amount owed on the loan and the foreclosure does not proceed.

- Some lenders will also allow a "short sale", where the lender agrees to accept less than the full amount of the debt. Again, a sale of the property and receipt by the lender of a pre-agreed amount will settle the loan and the foreclosure will not proceed.

STEP TWO: The lender or trustee sets a date of sale and notifies all the parties, including other lien holders, and state and federal taxing agencies. The sale notice must be posted and and published for a specified period of time before the sale.

STEP THREE: The trustee's sale or auction is held at the steps of the county courthouse, or other designated public location in the county where the property is located. Bidders are generally required to submit certified funds (cashier's check or money order) in the full amount that they are willing to bid (exception in the State of Arizona where the winning bidder is required to submit a non-refundable deposit in the amount of $10,000.00 with the remainder of funds due by 5:00pm the next business day). Past due taxes or other senior liens become the responsibility of the winning bidder. If the minimum bid is not met, the property will revert back to the lender and becomes an REO (Real Estate Owned) and can then be purchased directly from the lender.

- Some agents specialize in selling these REO properties. They establish a relationship with the lender providing an important service, which in turn can generate a consistently full pipeline of business for the agent.