Foreclosure Process in Texas
What is a foreclosure?
Foreclosure is a process that allows the lender to take over the property when a homeowner defaults or falls behind on mortgage payments. This can be due to hardship or strategic default, which is defined below:
Hardship: can include (but not limited to) job loss, reduce working hours or pay rates, unexpected large bills (e.g. medical bills), heath, divorce, some unexpected events, etc
(Picture from CDPE)
Strategic default: is the case when the homeowner may be able to pay the mortgage but simply chooses to walk-away from the mortgage. This is often done when the homeowner owes more on the home than it’s worth.
The Foreclosure Process in Texas: Foreclosure is a process and not a product (e.g., it is not a house, nor a land, etc.). There are three phases of foreclosure from the time a homeowner defaults to the time the lender or Bank sells the property. These phases are pre-foreclosure, foreclosure at court-step, and post-foreclosure also known as REO (Real Estate Owned by bank).
Pre-foreclosure Process (Phase 1) in Texas: Notice of Sale Timelines
When a homeowner falls behind on mortgage payments, the lender will send a series of notices to the homeowners allowing them to correct the problems, otherwise its’ intention to sell the property at auction. Per Texas Property Code 51.002 these notices must give minimum number of days to the homeowner prior its action. These are:
1) Notice of Default (minimum 20 days)
2) Notice of Acceleration (minimum 20 days)
3) Notice of Sale (Sometimes combined with #2 above)
i) Minimum 21 days.
ii) Posted at Court House
iii) Mailed, certified Return Receipt Requested, to debtor with address on Deed of Trust.
iv) Filed with County Clerk
Foreclosure Process (Phase 2) in Texas: Conduct of Sale
If the problem has not been resolved between the lender and homeowner prior to the date and time of the sale, the property will be auctioned and awarded to the highest bidder as follow:
· Place of Sale: At designated spot in County Court House
· Day of the Sale: 1st Tuesday of the month whether or not it falls in the weekend, holiday, new year, 4th of July, or weather condition, etc.
· Time of Sale: 3 hours window Between 10:00 AM-to-1:00 PM and 1:00 PM-to-4:00 PM as posted
· Method of Payment: Exact amount with Cash, Certified cashier check/money order, or combination of all.
Conduct of Sale in Texas: There are two types of foreclosure process in Texas, Judicial and non-judicial. Each one is define in detail as follow: OR
1) Judicial foreclosure process in Texas:
This type of foreclosure must be with court approval and conducted by Sheriff and the homeowner might have rights of redemption for a period of time. Judicial foreclosure applies to the following types of situations:
i) Tax Sales: This type of foreclosure is conducted by Sheriff and the homeowner has rights of redemption as follow: (Therefore if you buy Tax Sale foreclosure you should not immediately list it for sale)
(1) Rights of Redemption
(a) Two (2) years if: the property is homesteads, agriculture exempt, has minerals.
(b) Six (6) months for other cases
(2) Home equity liens
(3) Certain Military Debtors
(4) Deceased Debtors
2) Non-Judicial foreclosure process in Texas: (Typically Deeds of Trust)
This type of foreclosure is conducted by Trustee or Substitute Trustee and controlled by Texas Statutes and terms of the Deed of Trust. There is no Right of Redemption for these types of foreclosure.
· Post Sale Affidavit (by whom, what it covers, etc.)
Post-foreclosure Process (Phase 3): Property goes back to Bank, Real Estate Owned (REO)
If the property is not sold in auction, as described above, it goes back to the lender or Bank. After that point, the property will be known as REO (Real Estate Owned by bank or lender) and will be listed in MLS, by an authorized licensed real estate agent, to be sold. This is the type of property that most of purchasers, by mistake, refer to as foreclosure.
Click www.TexasFiveStarRealty.com/Foreclosure_REO_Selling_Process_By_Banks.asp to see the process and procedures from Banks to Sell their foreclosed Properties.
List of Foreclosures in North Texas:
For the most up-to-date list of foreclosures (REOs) in North Texas, please visit http://www.texasfivestarrealty.com/list_of_foreclosures.asp