Understanding the foreclosure process in TX is an important part of navigating your own home foreclosure.
Before we dive in…
Understanding the Foreclosure Process in TX
What is foreclosure anyway?
Foreclosure is the legal process that lenders use to take back property securing a loan, generally after the borrower stops making payments. So basically, if you stop making payments on your home or land, then the bank can take back that property through a process called foreclosure.
Foreclosure is no fun! But just know that it’s definitely not the end of the world.
When you know how foreclosure in TX works… you’ll be armed with the knowledge needed to make sure that you navigate the process well and come out the other side as well as possible. It may seem daunting, but just understanding the foreclosure process can help you be a step ahead of the process.
The Basic Stages of A Foreclosure
There are several stages that are an important part of any foreclosure process.
Foreclosure works differently in different states around the US.
Depending on the state you’re in, there are two different ways used to foreclose upon a property: judicial sale or power of sale.
Connect with us by calling 972-945-7299 or through our contact page to have us walk you through the specific foreclosure process here locally in Dallas / Fort Worth, TX.
Just know that with either scenario, foreclosure typically doesn’t go to court until payments have been missed for about 3-6 months. Usually (but not always), a lender will send out many notices that you are in arrears – or overdue or behind in your payments.
Understanding the foreclosure process…
Under Judicial Foreclosure:
- Your mortgage lender must file a suit in the court system.
- The court will send you a letter demanding payment.
- Assuming the loan is valid, you’ll have 30 days to bring your payment to court in order to avoid foreclosure (and sometimes that time frame can be extended, it just all depends).
- If you don’t pay during the allotted payment period, a judgment will be entered and the lender can request the sale of your home or land – usually through an auction.
- Once the property is sold, then the sheriff serves an eviction notice and forces you to vacate the property immediately.
Under Power of Sale (or Non-Judicial Foreclosure):
- The mortgage lender serves you with papers demanding payment, and in this case, 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 then drawn up and control of your property is transferred over to a trustee.
- The trustee can then sell your property at a public auction to the lender (notice must be given). And then the lender owns your home.
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 the auction.
What Happens After A Foreclosure Auction?
After a foreclosure is complete, the loan amount is paid off with the proceeds from the sale.
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 / homeowner.
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, which can be a huge difference from the fair value of the property. So make sure you have a good understanding of what the laws are in your state.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different. Don’t just assume…know what the laws are in your state.
Generally, it’s best to avoid a foreclosure auction if at all possible. Instead, call up the bank and see if there’s anything you can do to start catching up on your payments or see what if they’re willing to work with you to get going in the right direction. Another option is to work with a reputable real estate company like us at Madison Lea Homes to help you negotiate discounts off the amount owed in order to avoid having to go through 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 Dallas / Fort Worth, Madison Lea Homeas can help you.
We buy houses in Dallas / Fort Worth TX like yours from people who need to sell fast.
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Another Foreclosure Resource For Dallas / Fort Worth TX HomeOwners: