We break down the foreclosure process in Rochester, NY into 5 steps. For more information or if you have any questions- please give us a call. We would love to chat!
Real Estate Professional
Helping Homes REI,LLC
144 Fairport Village Landing, Ste 179
Hi, this is Chris Lawrence from Helping Homes. Today, I wanted to take a deep dive into the foreclosure process in Rochester, New York. We have helped individuals avoid foreclosure, walked them through the short sale process and purchased their home, and even given them information. And really, at the end of the day, we’re trying to create a win-win situation for the individual in the foreclosure process and ourselves.
So, I wanted to take a little more time and talk about the foreclosure process from what the borrower goes through and how we can purchase properties to help out the homeowners in foreclosure. So, we’ll break this down into five steps of the foreclosure process. So, first off, what is a foreclosure? A foreclosure is a process, which has started when the homeowner falls behind on their mortgage payments. Usually, it’s anywhere from one to three months. Really it just varies on your state and counties.
So, first off, we’ll start with step number one, missed payments. As I mentioned before, it starts off with missed mortgage payments. Usually, it starts with a hardship. Someone might be unemployed, death in the family, divorce, medical challenge, whatever that hardship may look like those are some of the main reasons why people stop paying their mortgage. If you are in this situation it’s essential that you reach out to the bank and talk with the lender as soon as possible. Sometimes you will find that they are agreeable, and there may be some options for you to avoid foreclosure. They might want to avoid this as much as you do.
The bottom line is banks are in the business of lending money. They’re not in the business of owning real estate because it’s very costly. Filing a foreclosure with the court, then holding onto the property, they do not want to hold on to it that is for sure. Again, they do not make money owning real estate. They make money lending on the property. So, they want to avoid owning the property at all costs because, if they do buy a property they have to maintain it, cut the grass, all the maintenance, winterize it all on their dime. So, what happens if the home is in disrepair? How are they going to sell this? Maybe they go through the process of hiring a contractor to fix it up. The banks don’t want to do that. And, frankly, they hate this and it’s very costly. So, banks will, oftentimes, try to work with you to avoid foreclosure.
So step number two, public notice. After three to six months, again this varies in state and counties the lender will record a public notice with the county court indicating that the borrower is in default on the mortgage. In Rochester, New York this can be called a lis pendens, or notice of default. This is when people in the public find out about your property. So, you might be receiving phone calls, emails, letters in the mail, that sort of stuff.
Step number three, the pre-foreclosure process. So, after receiving notice of default or lis pendens from the lender, the homeowner enters the pre-foreclosure period. And this can be anywhere from 30 to 120 days, depending on your local county. The homeowner can work out an arrangement with the lender to start a short sale process, may work out an arrangement with the bank and say, “Hey, look, I have a mortgage that is $200,000, and the house is only worth $150,000 now. So, I’m paying more than the house is worth. Can we work out a short sale and sell it for less than I owe?” And sometimes the banks will be willing to work with you.
And you’re probably thinking, “Why would the banks want to work with you and pay less than what they owe,” because, frankly, they would rather recoup some of their investment rather than losing it all. So, rather maybe recouping 150,000 versus losing 200,000, so therefore the difference would be $50,000. And to them that $50,000 is a write off, they will just count it as a capital loss. So, short sale is always an option and worth, at minimum, talking to your bank to see if that would be a good fit for you, and would work for you.
If the borrower pays off the default during this phase of the pre-foreclosure it’ll stop the foreclosure and put everything back into good standing, which will end the foreclosure. The borrower will avoid a sale of the property and eviction, but if the default is not paid and the foreclosure continues this will trigger an auction, which is step four. The lender, or the bank’s representative will set a date for the home to be sold at a foreclosure auction. The notice of trustee sale, which is recorded at the county clerk’s office, this will be public notice, which they have to put in a local newspaper for 30 days before the foreclosure auction. Auctions can be held at the court steps, the county court steps. The borrower has the right, if they can figure out a way to get the money together, to buy the house on the day of the auction. They can actually bring the money on a day of the auction and cancel the sale.
If the borrower doesn’t purchase the home, it will be sold to the highest cash bidder, which usually has to put down a non-refundable down payment of 10 to 25% of the purchase property.
And if no one bids on the property, either the homeowner doesn’t buy it or no one bids on the property, like an investor, this will then go to or become a bank owned property, which will be the fifth step, which is post- foreclosure. So, if there is not a third-party that purchases at the foreclosure, then the lender takes ownership of the property. Again, banks do not want to own property. They are in the business of lending money, and that’s how they make their money. So, once the bank buys back the property, this then becomes an REO, which is a real estate owned property by the bank, which means that the bank now is the owner of the property.
And then, this is kind of a weird time when the bank owns it, and a weird period because it’s hard to do business with the banks and figure out information because, again, this isn’t what they do best, they lend money. So, banks are not always the best at owning the property. So, when it gets to this stage, it can be difficult to get information about the property and purchasing it. And these bank owned properties are usually sold one of two ways. Oftentimes, they’re listed with a real estate agent that specializes in REOs, and list it on the open market. Or an online platform such as Zillow, Hubzu, auction.com, which they will try to auction it off. And, usually, it’s represented by an REO agent as well.
So, this is the foreclosure process in a nutshell and how it works. It can be a little scary for the homeowner, and an opportunity for myself and my business, Helping Homes, to help guide you through this process, and navigate these times to create a win-win situation. Whether that’s helping you get information, purchasing your house to avoid foreclosure, walking you through the short sale process, whatever that is we would love to help. And, again, I’m Chris Lawrence, if you have any more questions, please feel free to reach out to me on our website at www.helpinghomesrei.com, or give me a call on my cell phone. Look forward to speaking with you soon. Take care.