When talking about real estate, one cannot afford to avoid mentioning foreclosure. This is because it has really become a big issue nowadays. It therefore begs the question, what does foreclosure really mean, how does it happen. Well, to begin with, a precise definition will do. A foreclosure normally refers to when a person who owns a home is not capable of paying for their mortgage. In such an event, the lender, in most cases being a bank or any other financial institution, initiates a process of repossessing the property. The property is then sold so that they can be able to recover their money and cover for any other loses.
The process, which is normally a legal one, happens when any owner fails to repay their loan resulting to a situation whereby a non-payment notice is issued by the lenders of the loan. Banks and mortgage companies are known to use this method to recover debts. Foreclosures are of two types, strict foreclosure being one of them and foreclosure by sale being the other. Strict foreclosure method happens when the defaulter’s property is absorbed by the loan provider such as banks. They normally take it as a substitute for the loan that was taken by the defaulter. They can then later auction the property in the presence of a government official. What the bank does is to come up with their offer and put it across to the potential buyers.
The foreclosure auctions are usually put on the newspaper as advertisements or on any other means that is bound to gain public interest. The banks or loan lenders normally estimate the price of the foreclosed property to match the kind of money that the loan defaulter borrowed from them. In the event of bidding for the foreclosed property, its price normally goes down as compared to the initial real value of the property. Realtors in this case get the advantage of selling the same property later at a high price. The auction favors the person who makes the highest bid of amount, since he gets to walk away with the property for outbidding the rest.
The other kind of foreclosure referred to as foreclosure by sale happens when one obtains a property at a value that is lower than the one actual valuation in the market. The homeowner in this case sells the property at a cheaper price. What motivates them to take such a step is because it enables them to get money to pay for their due payments plus they may be able to make some cash in some cases. This process actually enables the original owner to at least avoid bankruptcy. It also provides them with an opportunity to salvage part of their own equity. The person buying the property benefits too, and in a big way because they save a lot or if you like, they make a profit since they buy the property a price that way below the actual market valuation.This is the right opportunity to acquire a property at a better deal.