FORECLOSURE » Prevent Foreclosures

The process of foreclosure, if taken far enough, can result in a public auction, which basically means you're about to lose your house. For buyers, this is a great time to score a cheap house with all the fixins', but for the owner, it can be one of the most difficult periods of a lifetime.

When Is a Home in Danger of Public Auction?

Fortunately for the owner of a home, public auction is the last step inthe lengthy process of foreclosure. Usually, the owner will have had to default on the mortgage loan after around three months of missed payments. At this point, the mortgage lender will send what is known as a Notice of Default (NOD), which will alert the homeowner that too many payments have been missed.

If no action has been taken after the NOD has been received, the lender will send out a Notice of Acceleration, which informs the homeowner of the need to pay the full balance of the loan in order to avoid losing the house. If still no action is taken, the Notice of Sale is sent out, which basically alerts the public of the intended sale of the homeowner's property. At this point, the homeowner still owns the property, but is in danger of the public auction, which usually occurs several weeks later.

In order to save a home, the homeowner should take steps to do so sometime in the process of foreclosure before it is in danger of going to public auction.

What Happens at the Public Auction?

If your home is at risk for public auction, it's good to learn what happens in this last step ofthe process of foreclosure. First, an opening bid is set on the property by the lender, usually for the outstanding loan balance, interest that has accrued, and other fees. If bids don't match the opening bid, thepropertyis purchased by the attorney conducting the sale on behalf of the lender and considered Real Estate Owned (REO).This means, your property will be owned by the lender - however, you still could be responsible for some of the balance.

Going through the process of foreclosure is something no one should have to endure. So if you are currently suffering through this tough circumstance, now is the time to talk to your lender to avoid reaching the point of public auction.

Consumers should be weary of paid programming that encourages them to make huge profits in foreclosure investments. Sure, there have been success stories of people who "paid no money down" and made "huge profits" by "investing in foreclosures," but their are dangers lurking under the murky water of investing in foreclosures for profit. Just because home prices are lowered and mortgage rates are at historical bottoms, you must consider the dangers of investing in foreclosures before taking the first steps.

The game of investing in foreclosures was easier years ago when fewer people were willing to take the risks associated with the process. But with the surge of foreclosed properties, people are itching to find a way to convert the financial storm clouds to those with sterling silver linings. If you are getting the itch to invest in foreclosure, please consider the following dangers:

• Ending up with "money pits" that require a never-ending stream of cash to repair
• Having to evict tenants who do not plan on leaving without a long, tiresome battle
• Non-savvy consumers new to the foreclosure process may unwittingly purchase homes that are saddled with substantial tax burdens that they will become responsible for
• State laws that can draw out the foreclosure process from a month to more than a year
• Over saturated market with more properties than prospective home-buyers may leave you saddled with a foreclosed property for longer than anticipated
• Home-buyers are finding it increasingly difficult to secure home loans, thus increasing the time you will need to be saddled with your foreclosure investment property
• There are several ways to buy foreclosed homes, but purchasing foreclosures at auction are the riskiest as you will be buying a property sight unseen and without an inspection

As long as you properly educate yourself on the dangers involved in foreclosure investment, you may be able to make the business work for you. Do not, however, enter the game blindfolded as you may be very upset by the ultimate outcome.

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