Foreclosures – REO

What’s a Foreclosure – Bank Owned Property?

Bank properties are acquired by the Banks through the foreclosure process, or a deed from the mortgagor to the Bank in settlement of the loan.  The process of foreclosure can be quite complex.  The Bank usually writes to the homeowner notifying them of any late payments.  At some point, which varies from Bank to Bank, the Bank will file a lawsuit against the property.  A notice of Lis Pendens is recorded in the public records.  This puts the world on notice of the foreclosure.  Any conveyance of the property will be subject to the outcome of the foreclosure.  If the Bank is successful in the foreclosure, the clerk will issue a Certificate of Title to successful bidder at the courthouse auction.  In many cases, the successful bidder is the Bank.  If the Bank properly serves the junior lienholders, their lien against the property will be eliminated.   Special care should be given to delinquent taxes and association fees which might survive the sale.  Due to the incredible complexity of this process an attorney should be consulted.  This article is a very broad overview.

Some homeowners deed the property back to the Bank after extensive negotiations and in some cases litigation.  Care should be given to tax and deficiency issues.  A deficiency is the amount still owed to the back when the value of the property is less than the amount of the debt.  Again, an attorney should always be consulted in this process.

When the bank tries to sell the property, they list it with a real estate broker.  The prospective purchaser makes an offer in writing through his agent.  The Bank usually counters the offer with a lengthy Real Estate Purchase Addendum.  Each Bank has its own Addendum.  For example, in an existing file of mine, the Bank of America, N.A. countered a 10 page offer with a 16 page addendum.  An attorney definitely should be consulted to analyze the addendum.  The addendum may have been written in another state, with no modifications to accommodate Florida law. Finally, the Bank often provides title insurance.  An attorney should definitely be retained to review every part of the closing.  The title company is working for the Bank, not the Buyer of Seller.  As always, each side should retain counsel.