Making sense of the foreclosure process in Texas is an important part of understanding the foreclosure you are dealing with.
Before we get it started…
Just What The Heck Is Foreclosure?
Foreclosure is the legal process that mortgage lenders use to re-claim a house usually after the borrower stops making payments.
Make no mistake about it, foreclosure sucks.
But when you “get” how foreclosure in Texas works, it makes the process 1000 times less stressful and scary. It also helps you to make the best possible decisions to help you get through it.
The Basic Stages of A Foreclosure
The foreclosure process differs depending on where you live. It can go down in one of two ways. Those are: judicial sale or power of sale.
Contact us directly by calling 682-990-0209 or through our contact page and we can walk you through how foreclosures work here in Texas.
In either scenario, it usually takes between 3-6 months of missed payments before the foreclosure process formally begins. Usually (but not always), a lender will send out a bevy of notices that you are behind on your payments. (in arrears)
- Your mortgage lender must file suit through the courts.
- You’ll get a letter from the court stating that you must pay immediately.
- If the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (you can sometimes be granted an extension).
- If you still don’t pay during this period, a judgment will be entered and the lender can request the sale of your property to recoup the money owed to them. (usually at auction)
- Upon sale of the property, the sheriff serves you with an eviction notice and you have to leave the house immediately.
Under Power of Sale (or Non Judicial Foreclosure):
- The mortgage lender serves you with papers demanding payment, and the courts are not required – although the process may be subject to judicial review.
- After the given waiting period has run its course, a deed of trust is drawn up and control of your property is conferred to a trustee.
- The trustee can then sell your property for the lender at a public auction (notice must be given).
Anyone who wants to buy the property must be notified during both judicial and non judicial foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to get their money once the property is sold.
What Happens After A Foreclosure Auction?
After a foreclosure is done, the loan amount is paid off with the money made from the home sale.
Sometimes, if the money made at the auction isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.
This is when the bank gets a legal judgement against you 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. It all depends.
Here’s a great resource that lists the state by state deficiency judgement laws, since every state is different.
For the most part, you want to do everything in your power to avoid a foreclosure auction. Instead, communicate with the bank, or work with a trusted local real estate firm like us at APH Homebuyers to help you negotiate down the amount owed and help avoid the foreclosure process.
Reach out to us you need to sell a house in the Dallas area.