Understanding the foreclosure process in FL is an important part of navigating your own home foreclosure.
Before we dive in…
Understanding the Foreclosure Process in FL
What is foreclosure anyway?
In legal parlance, foreclosure is a mechanism which lenders can initiate to reclaim the property which serves as collateral for a loan, in situations where the borrower defaults on their loan obligations. The process, though onerous, need not signal the end of the road for homeowners.
Acquiring a firm understanding of how foreclosure operates in the FL market can equip you with the necessary knowledge to navigate this intricate procedure adeptly, ensuring that you emerge from the experience in the most favorable position possible.
The Basic Stages of A Foreclosure
There are a few stages that are important to any foreclosure process.
Foreclosure works differently in different states around the country.
The two ways different states use to foreclose upon a property are: judicial sale or power of sale.
In either circumstance, foreclosure generally does not proceed to the court until the borrower has missed payments for 3-6 months. Typically (but not invariably), the lender will issue multiple notifications indicating that the borrower is in arrears – indicating that the payment is overdue or behind.
Under Judicial Foreclosure:
- Your mortgage lender must file suit in the court system.
- You’ll get a letter from the court demanding payment.
- Assuming the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (and sometimes that can be extended).
- If you don’t pay during the payment period, a judgment will be entered and the lender can request the sale of your property – usually through an auction.
- Once the property is sold, the sheriff serves an eviction notice and forces you to immediately vacate the property.
Under Power of Sale (or Non-Judicial Foreclosure):
- “The financial institution that provided the mortgage to you sends a written document to you, a letter of legal demand that necessitates payment, and the courts are not mandatory in this legal undertaking – though there is the possibility that it might undergo a judicial evaluation.”
- Once the designated duration has passed, a document called a deed of trust is created and the reins of your property are surrendered to a trustee.
- Following the transfer of control to the trustee, it is permissible for them to sell your property to the lender in a public auction, with appropriate notice being provided.
During any foreclosure proceeding, it is requisite to notify all stakeholders with a vested interest in the property, regardless of the type of foreclosure being employed.
As an instance, every contractor or bank with liens against a foreclosed property holds the right to acquire from the payments earned during the auction.
What Happens After A Foreclosure Auction?
Following the completion of a foreclosure, the sum owed on the loan is satisfied using the profits obtained from the sale.
Sometimes, if the sale of the property at auction isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.
In the realm of mortgage foreclosure, a “deficiency judgment” may be rendered, which bestows upon the lender a legal decree against the borrower for any remaining balance left on the loan principal, subsequent to the auction of the foreclosed property.
States utilize varying standards to determine the sum due in a “deficiency judgment.” Some regions restrict this amount to the property’s “fair value” at the time of sale, while others enable the entire loan amount to be imposed on the borrower.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.
It is generally advisable to avoid participation in a foreclosure auction. Instead, it is wise to initiate communication with your mortgage lender, or to partner with a reputable real estate agency such as our company, which can aid you in bargaining for a reduction on the outstanding amount and circumventing foreclosure entirely.
Experienced investors have the ability to aid in the reduction of the debt amount during a sale by directly negotiating with lenders, and in some cases, eliminating the debt entirely, even if the property’s value is less than the outstanding debt.
If you require assistance in selling a property situated in the vicinity of Florida, we would be delighted to offer our services.
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Another Foreclosure Resource For Florida FL HomeOwners: