Understanding the foreclosure process is crucial if you are facing the possibility of losing your home in Florida. It is a complex legal procedure that can be overwhelming and confusing, but having a basic understanding of the process can help you navigate it more effectively.
Before we delve into the details of the foreclosure process, let’s take a moment to define what it is. Foreclosure is the legal process that a lender uses to take possession of a property when the borrower fails to make payments on their mortgage. It involves a series of steps that are designed to protect the rights of both the lender and the borrower.
Before we dive in…
Understanding the Foreclosure Process in Florida
What is foreclosure anyway?
Foreclosure is a legal process used by lenders to take back property that secures a loan when the borrower defaults on their mortgage payments. While it can be a challenging experience, it’s important to know that it’s not the end of the world. With a basic understanding of how foreclosure works in Florida, you can navigate the process more effectively and increase the chances of a favorable outcome.
The foreclosure process in Florida usually begins when the lender files a lawsuit against the borrower in court. The complaint will state the amount of money owed on the mortgage and request that the court order the sale of the property to pay off the debt. The borrower will then be served with a copy of the complaint and a summons to appear in court. If the borrower fails to respond or does not have a valid defense, the court will enter a default judgment in favor of the lender.
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 scenario, foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – overdue or behind in your payment.
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 mortgage lender serves you with papers demanding payment, and the courts are not required – although the process may be subject to judicial review.
- After the established waiting period has elapsed, a deed of trust is drawn up and control of your property is transferred to a trustee.
- The trustee can then sell your property to the lender at a public auction (notice must be given).
Anyone who has an interest in the property must be notified during either type of foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.
What Happens After A Foreclosure Auction?
After a foreclosure is complete, the loan amount is paid off with the sale proceeds.
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.
A deficiency judgment is where the bank gets a judgment against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale.
Some states limit the amount owed in a deficiency judgment to the fair value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.
Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank, or work with a reputable real estate firm like us at The Fast Home Buyers to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate it, even if your home is worth less than you owe.
If you need to sell a property near Florida, we can help you.
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Another Foreclosure Resource For Florida Florida HomeOwners: