What is Foreclosure?
Central Ohio Real Estate
Foreclosure is a legal process that a lender initiates to gain title to a home that was used as collateral for the mortgage loan that is now in default. In Ohio, lenders may foreclose on a mortgage in default by using the judicial foreclosure process. A foreclosure terminates the homeowner’s rights covered by a mortgage, and makes the lender the absolute owner of the property. The process starts when the homeowner fails to make payments of the money due on the mortgage at the specified time and the lender files suit. A lender may send a Notice of Delinquency, which is a notice to a borrower with property as security under a mortgage or deed of trust that he/she is delinquent in payments. If the money that is owed plus legal fees for preparing papers for the default, is not paid within a certain time, foreclosure proceedings will begin.
The bank may also file a Lis Pendes, which is a formal notice that starts the process. If this is filed, the homeowner is required to appear in court to answer the allegations. The homeowner may ask for an extension, which may or may not be granted. If it is not granted, the last phase of the foreclosure process begins, which is known as the Auction phase.
Short Sale - What is it?
A short sale is when a property is being sold for less than it is current market value. The lender must agree to the short sale and a process must be followed.
1. The homeowner must be in a distressed state, which means they are behind in payments and the property is usually facing foreclosure. A distressed state could include job loss, divorce, medical emergency, you owe more the house is worth, or you are unable to make your mortgage payment.
2. A set of documents known as a short sale package must be completed to prove the homeowner cannot continue mortgage payments. A hardship letter explaining the cause of the financial distress is usually required as well.
3. Effort must have been made to put the home on the market at its full market value with a detailed report of the sales activity.
4. If the lender approves the short sale, a buyer is found and a set price is agreed upon, the sales process would then continue as a normal sale would.