What percentage of county foreclosures become REO homes?
The foreclosure process begins when a borrower is 3 months or more behind on their monthly mortgage payments. When this happens, the bank will usually post a foreclosure notice in the courthouse where the property is located. This is known as a foreclosure filing.
Once this article is published, the property will go up for auction on the first Tuesday of the following month. Mortgage companies must post the foreclosure notice at least 21 days before the foreclosure sale, which typically takes place on the courthouse steps.
In almost 80% of cases, the borrower will catch up on their mortgage payments or reach an agreement with the lending company so that the property will not be foreclosed on. Other times, investors will contact the owners of these properties and purchase the properties directly from them before foreclosure occurs. Sometimes the buyer will offer the mortgage company less than what is actually owed on the property. If the lender accepts the offer, this is known as a short sale.
If a property makes it to auction, a trustee appointed by the lending company will announce the minimum bid on the property (this is set by the lending company). Many times, no one makes an offer because the loan company has set the opening offer too high. Other times, the opening offer is reasonable and people start bidding on the property.
If someone is the highest bidder on the house, they must present the cash to purchase the property (to the trustee) before the end of that business day. Therefore, it is essential that the buyer at a foreclosure auction has the necessary cash to complete the transaction.
If no one bids on the property at auction, you go to a HUD registered agent (if the home was HUD insured). Otherwise, it goes back to the lender who usually hires a real estate agent to list the property and sell the house. These are REO Homes. Since about 20% of foreclosure listings make it to auction and about half of them make it through the auction without being bought, only about 10% of previous foreclosures end up being an REO agent-listed home real estate.