Many people rush into buying foreclosed properties because they can be purchased for bargain prices. What most people do not realize is that there can be a lot of legal intricacies involved in buying foreclosed properties. Different states have different laws so it is very important that one knows the laws of the state where the home is located when he or she is about to buy foreclosed properties. Not knowing the laws of the state where the foreclosed property is located can lead to some complications later on. Thus, it is very important that one should do some research about the laws before he or she buys foreclosed properties.
Judicial Foreclosure: A Different Animal
Most states allow judicial and extrajudicial foreclose of properties. According to 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 usually takes place when the mortgage instrument or the deed of trust executed by the mortgagee (lender) 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 and the borrower. 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 the original buyer.
As buyer, you need to be very careful when it comes to buying judicial foreclosed properties. The provisions of the 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. laws in most states allow the creditors to seek deficiency judgment and some laws give the borrower up to one (1) year to redeem the foreclosed property.
The one year redemption period provided for under the laws of some states can work greatly to your disadvantage. Note that if the debtor happens to recover financially within the one year time frame from when you bought the property at auction, he or she can buy back the property from you. Since some 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. Know where you stand; know the law as it may pertain to you.
