Have you ever thought about buying a home in pre-foreclosure? You’ve got lots of company, because stories abound that these homes are a bargain. Clients are often confused by the foreclosure process. Here in Nevada, when the owners of the home default on their loan payments for as little as 35 days, the lender has the right to begin the foreclosure by first recording and serving a Notice of Default, providing the amount of the default and stating that the loan can be redeemed (paying the amount of the default or alternatively paying the total amount due either with cash or a refinance of the loan) no less than 90 days from the date of the Notice of Default. If the loan is not redeemed, the next step available to the Lender is to record and serve the owners with a Notice of Trustee’s Sale providing for a sale of the property, often termed on the courthouse steps) a minimum of 20 days later. During that time, the owners still have the right to redeem the loan or postpone the sale. This often happens when the owners decide to short sale their home. Failing that, the Trustee’s Sale will occur and, either the Lender sells the home which is the “security” for the loan, or, if no one is willing to pay the minimum amount the Lender will accept, have the home revert to it.
So why does it take so long before an obviously abandoned house is foreclosed? Why have we not gone through a greater proportion of the homes on which there were defaults since the market crashed in 2007-2008? A wide variety of factors, like government efforts to protect homeowners, the sheer enormity of the number of defaults both out of necessity and strategic, interminable short sales and, in my view the greatest factor, Lenders’ withholding properties, sometimes for years, in order to maximize the return of the money they have invested in those homes as our market improves. Lenders feared that if they foreclosed all at once, they would crash that market beyond what has already happened. Your best bet is to ask a Realtor who is knowledgeable about foreclosures and preforeclosures to send you information about homes with your search criteria and guide you in making informed and successful bids.