How To Break In To The Foreclosure Space

[Ken M.]

First we need some clarification.

There are two types of Deeds for recording mortgages. There are Deeds of Trust (DOT) (mostly out west) and there are Mortgages. Typically east cost. Each state decides which one it allows.

In either case, the bank does not own the property. The borrower simply pledged the property as collateral for the bank's security that they will get paid back. The (DOT or Mortgage) is proof of that agreement.

The main difference between the two, is that a Deed of Trust (DOT) has written into it that the lender can go ahead and do a foreclosure if the terms of the agreement are violated. Usually it's a 90 day or so, public notice period. In a mortgage, it has to go before a judge. Which could take a long time depending on the judge's case load. A year is not uncommon. Monthly payments & fees continue to accrue.

Eventually, when legally allowed, a lender has the right to complete a foreclosure. That is, sell the property on the court house steps to satisfy (pay off) the mortgage loan. Every state has a set of restrictions they have to follow.

There is lots more to it, but the point here is that some people want to buy on the court house steps, at the “Auction”, because they think that is where the best deals are. That is a big mistake. 

The actual best time to buy is before the sale. The borrower still owns the property, can sell and is highly motivated.

At the auction is usually a "cash" purchase, before the auction can be creative finance.