Understanding the foreclosure process in Washington DC is an important part of navigating your own home foreclosure.
What is foreclosure anyway?
Foreclosure is the legal process that lenders use to take back property securing a loan, generally after the borrower stops making payments.
Foreclosure is no fun, but it’s not the end of the world either.
When you understand how foreclosure works in Washington DC, you will be armed with the knowledge to navigate it effectively and secure the best possible outcome.
The Basic Stages of A Foreclosure
Foreclosure works differently depending on where you live. The two ways states use to foreclose upon a property are Judicial Sale and Power of Sale. Washington DC implements Power of Sale, which is also referred to as a Non-Judicial Foreclosure. Virginia and Maryland use both use Non-Judicial foreclosure, however, sometimes Judicial foreclosure is used.
Under Power of Sale (or Non Judicial Foreclosure):
- The mortgage lender serves you with papers demanding payment. The involvement of the courts is not required, although the process may be subject to judicial review.
- After the established waiting period has elapsed, a deed of trust is drawn up and control of your property is transferred to a trustee.
- The trustee can then sell your property for the lender at a public auction,notice although they must give you notice.
Anyone who has an interest in the property must be notified during the foreclosure process. For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.
Foreclosures typically don’t go to court until you have missed three to six months of payments. It shouldn’t be a surprise because usually a lender sends out many notices that you are in arrears (overdue or behind in your payment).
Under Judicial foreclosure:
- The mortgage lender must file suit in the court system
- The court sends a letter demanding payment.
- Assuming the loan is valid, the homeowner has thirty days to bring payment to the court to avoid foreclosure. If you don’t pay during the payment period, a judgment will be entered and the lender can request the sale of your property, usually through an auction.
- Once the property is sold, the sheriff serves an eviction notice and forces you to immediately vacate the property.
What Happens After A Foreclosure Auction?
After a foreclosure is complete, the loan amount is paid off with the sale proceeds.
Sometimes, if the sale of the property at auction isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.
A deficiency judgement is when the bank gets a judgement against you for the remaining funds you owe to the bank on the loan amount after the foreclosure sale.
Generally, it’s best to avoid a foreclosure auction. Instead,talk to a loan officer at your bank, or work with a reputable real estate firm like Express Homebuyers to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale, or even eliminate it, even if your home is worth less than you owe.
If you need to sell a property in or near Washington DC, we can help you. We buy houses in the Washington DC area from people who need to sell fast.