The term pre-foreclosure may sound confusing to many people. When is foreclosure officially final? How does the pre-foreclosure process work? We’re here to help explain the difference. Continue reading to learn more.
What is a Pre Foreclosure?
Pre-foreclosure refers to the period when a property first enters the foreclosure process. Typically, pre-foreclosure begins when the homeowner/borrower first misses a mortgage payment and becomes more than 90 days late on his or her payments.
At this point, the lender will send the borrower a Notice of Default that states how late the payments are and how much the borrower must pay to correct the default.
This initiates the foreclosure process and the lender and homeowner then enter a period where the parties can try to correct the payment problem, or the lender can pursue an official foreclosure action in a New York court to attempt to resolve the default or reclaim the property from the borrower.
As a borrower who has defaulted, the pre-foreclosure stage can be very scary. But, you should not feel that hope is lost. You may still have many options that can either save your property or help you escape an official foreclosure on your home, such as a short sale.
Buyers interested in purchasing distressed and foreclosed properties also are likely to have a lot of questions. How do I contact the property owner? How do I make an offer for a short sale?
Whether you are someone who has received a foreclosure notice, or you are a potential buyer looking to purchase foreclosed homes, an experienced New York foreclosure attorney is critical for your success in the foreclosure or foreclosed home purchasing process.
Your local attorneys know the ins and outs of the foreclosure process for New York and will provide foreclosure advice that can help. Contact us today if you have any questions about the foreclosure process.
How Long Pre-Foreclosure Can Last?
In New York, the lender must send the borrower a Pre-Foreclosure Notice 90 days before officially starting the foreclosure process in court. This does not mean that the foreclosure will happen in 90 days, it simply means that the lender may decide to pursue a court-ordered foreclosure on the property if the borrower does not satisfy the delinquent payments or lender and borrower cannot come to some other agreement.
Even after the initial 90-day period ends, the foreclosure process in court will still take quite some time. In New York, the foreclosure process can take between 6 and 18 months.
What is a Foreclosure?
The pre-foreclosure period officially ends and foreclosure is complete when the lender has been reclaimed by the lender and sold. This means that the borrower was unable to keep up with the mortgage payments for a significant period of time and the borrower was unable to either (a) come to an agreement with the lender that would allow the borrower to keep the home, or (b) find some way to pay off the delinquent amount owed to the lender. Once the lender retakes possession of the property, the lender will list the property for sale through a real estate auction. This process involves the court and court-appointed officials as well.
Buying Foreclosure vs Pre Foreclosure Property
Buying foreclosed properties or properties in distress can be a great way to help some buyers get more bang for their buck or for real estate investors to make very profitable property purchases. But, the process of buying homes in the pre-foreclosure and foreclosure process can be a little confusing, too. Generally, if a home is in the pre-foreclosure process, potential buyers buy the property directly from the current distressed property owner at some kind of discounted price, as long as the distressed homeowner is able to pay back the money he or she owes his lender.
Some distressed homeowners may even sell the properties at amounts less than what they owe on the loan. Alternatively, if a lender forecloses on a property and puts the property up for auction, potential buyers have to wait for the pre-foreclosure lis pendens (the public notice) and then have to attend the auction and make a bid on the property.
Some auctions can lead to a very lucrative deal for bidders. Other auctions may not lead to as lucrative of a deal as it may first appear. There are advantages and disadvantages to buying properties in both the pre-foreclosure and foreclosure stages.
Typically, a buyer will find that buying in the pre-foreclosure stage has a lot more advantages even over the low price that often comes for homes up for auction. The chart below demonstrates some advantages and disadvantages of buying a home pre-foreclosure vs. post-foreclosure.
| Positives/Negatives | Pre Foreclosure | Foreclosure |
| Ability to Inspect Property Prior to Purchase | V | X |
| Potential Need to Pay Seller’s Costs & Fees | V | X |
| Property Sold As-Is | V | V |
| Repairs Should Be Expected | V | V |
| Reasonable Time to Close Purchase | V | X |
| Bank/Lender Approval Required | X | V |
Whether you are interested in buying a home pre-foreclosure or at a foreclosure auction, an experienced foreclosure attorney will help you make sure you are making the best choice.