Foreclosure Law: Things To Consider When Buying Foreclosed Properties
A lot of people rush into buying foreclosed properties because they are cheap. What most people do not really know is that there are a lot of legal intricacies involved in buying foreclosed properties. Different states have different foreclosure laws so it is very important that one knows the foreclosure laws of the state when he or she is about to buy foreclosed properties. Not knowing the foreclosure laws of the state when the foreclosed property is located can lead to some complications later on so it is very important that one should do some research about foreclosure laws before he or she buys foreclosed properties.
Judicial foreclosure
Most states allow judicial and extra judicial foreclose of properties. According to foreclosure laws, before judicial foreclosures can be considered as valid, a lawsuit has to be filed in court. The court has to decide on the foreclose case and then declare the property as judicially foreclosed. Judicial foreclosure usually takes place when the mortgage instrument or the deed of trust executed by the mortgagee does not include the power to sell the property in case of default.
According to the law, creditors can only enforce whatever rights are granted to them by virtue of the deed of trust or mortgage agreement executed by the creditor. Unless the provisions of the deed of trust or mortgage agreement specifically allow for extrajudicial foreclosure, the creditor cannot sell the property without a court order. This means that if you bought the property before it was declared as judicially foreclosed, you may lose the property to another buyer.
As buyer, you need to be very careful when it comes to buying judicial foreclosed properties. The provisions of the foreclosure laws vary from state to state so you need to make sure that you do not put yourself in jeopardy when you buy judicially foreclosed properties. Foreclosure laws in most states allow the creditors to seek deficiency judgment and some foreclosure laws give the borrower up to one (1) year to redeem the foreclosed property.
The one year redemption period provided for under the foreclosure laws of some states can work to your disadvantage. Note that if the creditor happens to recover financially within one year from the time when you bought the property on auction, he or she can buy back the property from you. Since some foreclosure laws specifically give the debtor the right to buy back the property, you do not have any choice but to allow the debtor to redeem the property.
