What is the difference between a foreclosure and a pre-foreclosure? If you’re considering purchasing one of these kinds of properties, it’s very important to understand what these terms mean and how the home’s status could affect its sale.
Always seek advice prior to, and know that you can definitely avoid a foreclosure, and pre-foreclosure is the platform to do that. Just because you get behind on your payments, understand you have options.
Kiesha: Hey, guys. You’re here once again with The Real Estate Stew with the What’s Cookin Crew. I’m Kiesha.
Patrick: And I’m Patrick, guys.
Kiesha: As always, we’ve got some great answers to some of your hottest real estate questions.
Patrick: Well, on that note, let’s see what we’ve got.
Kiesha: We don’t want to keep you all waiting. I know you have some good stuff.
Patrick: You want to pull one?
Kiesha: Go for it.
Kiesha: There’s a lot in there, though. Thank you guys for that. We have a lot of questions.
Patrick: There’s actually quite a few. Oh, wow. Okay. This is a good one, Kiesha. What is the difference between a foreclosure and a pre-foreclosure? The difference between foreclosure and pre-foreclosure.
Kiesha: Hmm. That’s a great question.
Patrick: Excellent, excellent.
Patrick: You know what? I think it would probably great. Let’s start with foreclosure, because most of you are going to relate to that. You hear that. Kiesha, why don’t you start us out. Foreclosure.
Kiesha: Absolutely. Yes, since that’s the most familiar. Foreclosure basically means for a homeowner that the home has been reclaimed or claimed by an entity, typically because of some type of non-payment.
Kiesha: Yes, a default. When you purchase a home, you sign agreements with lots of entities. You agree to pay taxes. You agree to abide by the rules of the HOA.
Kiesha: You agree to pay the HOA, if there is one.
Patrick: Agree to pay your lender.
Kiesha: Yes. Oh, yes. The mortgage. You have to pay that, too. So all of those things can, or not doing those things, I should say, can lead to foreclosure, where the entities step in and basically say, “You’re not following the rules.” So if you don’t pay, you don’t stay.
Patrick: You don’t stay.
Kiesha: That’s how we summarize the document that you sign at the time of closing. Essentially, when a house is on the market or being resold as a foreclosure, that’s what’s happened before it’s gotten to that stage. Now, pre-foreclosure, on the other hand, is the precursor.
Patrick: That’s the precursor. You know, guys, when you think pre-foreclosure, what I always like to tell people is know that there’s many triggering events, and there’s also many options, depending on again, as Kiesha said, what entity you’re dealing with. There’s something called short sale you may have heard about, but there are many things. There’s short sell, there’s deed in lieu, there’s forbearance, there’s loan modification.
Patrick: Now, all of these things deal with your actual lender, the mortgage company. They will give you those options prior to a foreclosure in an effort to help you avoid the foreclosure. Contrary to popular belief, guys, most lenders … Lenders aren’t in the business to sell real estate. They’re in the business lending money …
Kiesha: To lend money.
Patrick: … and making interest on that money, etc., so they truly aren’t … Most of them aren’t wanting to foreclosure on your property …
Patrick: … so they’ll give you all these options to work through it. So keep that in mind. I do recommend when you’re thinking of these terms, definitely consult with a professional, such as attorneys …
Kiesha: Absolutely. A real estate agent.
Patrick: … and CPAs, real estate agents.
Kiesha: Absolutely, absolutely. One thing I need to also add in, because we’re here in the state of Texas, some of the things that we mention will be specific to Texas.
Patrick: Very specific to Texas.
Kiesha: For example, if you do find yourself in a situation where there’s a foreclosure process starting, Texas is a non-judicial state. Excuse me.
Patrick: You got it. Also, guys, let me add. There are states, as Kiesha said, that it’s going to be very specific. Judicial, non-judicial, but here in Texas, you actually can do both.
Patrick: You can do judicial or non-judicial. For many of you, you’re like, “What do you mean? What do you …” Well, you can always, again, reach out to a professional, realtors, etc., and they can go into more details with you on that.
Kiesha: Absolutely. Absolutely. Anything else you can add on that topic? That was a good question.
Patrick: Excellent, excellent. It’s one of those, Kiesha, that we could talk on for hours, but I think we’ve given enough information to help you guys understand that, number one, always seek advice prior to, and know that you can definitely avoid a foreclosure, and pre-foreclosure is the platform to do that. Just because you get behind on your payments, guys, understand you have options.
Patrick: Well …
Kiesha: If you have more great questions, please send them to us.
Patrick: You know they do, Kiesha. We know you’ve got great questions for us.
Kiesha: And we thank you for that. You can reach us at firstname.lastname@example.org. As always, please remember to subscribe …
Kiesha: … and comment.
Patrick: Don’t forget, guys. We’ll see you next time.
Kiesha: Bye, you guys.