This is the second post covering questions asked by attendees to the Foreclosure Buying 101 Webinar and RealtyTrac website demo.
View the most recent recording of the webinar.
In the last post we addressed the question, How Do Homeowners Avoid Foreclosure? In this post we’ll look at two questions regarding the public foreclosure auction. These two questions were both asked during a webinar on May 3, 2012.
1. Why does a property in foreclosure go to a foreclosure auction?
The foreclosure process is governed by state law, and all states require some form of foreclosure auction during the process. All states require a public advertisement or publication of the foreclosure auction prior to the actual auction event. This publication period is typically from one to three months, and the real estate auction itself is conducted in a public place, most often at or near the courthouse in the county where the property is located.
Presumably such a publicly advertised and conducted auction prevents lenders from unilaterally repossessing a property securing a delinquent loan. A foreclosure auction allows third-party buyers to bid on the property, creating an open marketplace for the property so the foreclosing lender does not take advantage of a distressed homeowner — particularly if that homeowner has equity in the auction home.
2. If you buy a home at the foreclosure auction, have the homeowners moved out?
Distressed borrowers still own the property and are able to live in the property right up until the property is sold at the auction. That means the winning bidder at the foreclosure auction may be responsible for evicting the property’s tenant. It’s not uncommon for the distressed homeowners to voluntarily vacate the property prior to the auction, but certainly not a guarantee.
Additionally, the Helping Families Save Their Homes Act signed into law in May 2009 provides additional protections for tenants occupying foreclosure properties. The law provides existing tenants who are renting the property a minimum of 90 days to stay in the property after the foreclosure auction, and also requires buyers at the foreclosure auction to honor the terms of any existing lease in place.
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