Many homeowners have found themselves in a bind in this real estate market. Some bought their homes at the height of the market and can no longer afford the mortgage payments, while many others are struggling with unemployment and underemployment and can’t afford their former lifestyle. Facing foreclosure can be one of the most stressful situations a homeowner can endure, but understanding the process can make it a bit easier. Keep in mind that each state has their own specific foreclosure laws, so if you feel like your family is in danger of foreclosure, it’s best to contact a real estate attorney immediately.

The foreclosure process that is used in all 50 states is either a judicial process or a non-judicial process.

Judicial Foreclosure This kind of foreclosure is initiated through the courts, and is much more costly and time-consuming for the lender. Lenders generally try avoiding a judicial foreclosure if they can, but they have to abide by the laws where the property is located.

The first step a lender will need to take in a foreclosure is to file a notice of Lis Pendens when the borrower stops making monthly payments. Each lender differs on their forgiveness period, but generally after three mortgage payments have been missed, the lender will want to begin the process. The Lis Pendens is a formal complaint that includes the details of your debt as well as an explanation as to why the lender has a right to foreclose on this property. Mortgaged property is considered secured debt, since your home is collateral in the event of non-payment.

Once you receive the Lis Pendens by mail, a publication notice or individual server you will have the opportunity to object the complaint in court. Unless there was some kind of mix up or false accounting, your defaulting on the loan will be enough reason for the courts to proceed with the foreclosure. A judgment is then issued for the remaining loan balance plus the cost of the foreclosure.

The court can then issue a writ to authorize a sheriff’s sale of your property, which is a public auction at a public place. The highest bidder will become the new owner and will be given a sheriff’s deed to the property. If no one bids on your property, the lender will bid in for the amount owed on the mortgage and will become the new owner of the property.

If no one bids at the sheriff’s sale, the lender “bids in” for the amount owed and is given the sheriff’s deed. Some states will have a redemption period that allows you to buy back your property in a certain period of time. To buy back your property, you will need to pay the sale price plus interest on the mortgage. The lender may also require that you pay back any property taxes, legal fees and insurance payments. Most borrowers can only buy their house back if they can find a new lender to refinance them or if they can sell the house and pay off their debt.

For Part II and for more information on Denver Colorado homes for sale, please visit us at PorchLight Realty.

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