The Process Of Foreclosure And How To Avoid It!

The Process of Foreclosure…And How To Avoid It!


As a homeowner, there is one word you never want to be confronted with: FORECLOSURE. It is the last straw as you begin the process of losing your home. In this article, we are going to take a closer look at WHAT foreclosure means and HOW you as a homeowner can avoid it!

What Is Foreclosure?

When a homeowner signs a mortgage, they are making a promise to the lender that they will make the agreed upon payments until the loan is fully paid. When a homeowner is no longer able to make those payments, they are at risk of their home being taken back by the bank.

To get technical, foreclosure is the legal process in which the lender takes possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.

Why Wouldn’t A Homeowner Make A Payment?

There is no simple answer to this question – some reasons may include:

● Recent layoff
● Inability to work due to medical issues
● Divorce
● Job Transfer
● Excessive Debt
● Maintenance becomes too expensive

What Happens When a Home is Foreclosed?

There are multiple steps to a home reaching foreclosed status. Here is a brief summary of the steps of the foreclosure process in Texas (Note that the process varies by state):

Step 1: Missed Payment and Notice of Default – “Pre Foreclosure”

The first aspect to a home going into foreclosure is that the homeowner misses the payment and is 120 days delinquent. The lender provides the homeowner with the Notice of Default (or NOD) to initiate the foreclosure process. The homeowner will have 20 days to meet the requirements of the loan. If the homeowner does not succeed, the home goes into the foreclosure process.

Step 2: Notice of Sale

Once the 20 days have passed, the lender will issue a Notice of Sale, which informs the homeowner of the lender’s intent to sell the property at a foreclosure sale. The homeowner will then be provided at least 21 days before the sale is scheduled.

Step 3: Foreclosure Sale (Auction)

The property will be sold to the highest bidder at the foreclosure sale, where the lender can also bid on the property – if they are the highest bidder, the home will now revert back to the ownership of the bank. The home will be considered an REO, or Real Estate Owned.

Step 4: Deficiency Judgement

If the property sells for less than what is owed on the mortgage, the homeowner may still be responsible for the difference. In Texas, the lender has two years to file a lawsuit to collect.

Alternative Outcomes

In order to avoid their home going into auction, a homeowner must either obtain a postponement or cancel the sale.

● Postponement: If a homeowner is able to obtain a postponement, a new foreclosure date may be set for the future.

● Cancellation: This can occur for a multitude of reasons. Most commonly, it is due to the homeowner initiating a short sale of the property.

How To Save Your Home From Foreclosure

Unless the homeowner has the funds to either pay off the debt or hire legal counsel to postpone the sale date, the homeowner has limited options – but there is always an option.


Selling a home all cash prior to the foreclosure date can provide financial support to the homeowner. When the property goes to an auction, there is no MINIMUM that the property must sell for, placing the homeowner at risk for a deficiency judgement. However, if the homeowner has the opportunity to identify an investor who is willing to pay maximum value for the home, the homeowner is more likely to avoid future financial burdens from their home.

Additional benefits to selling the home all cash PRIOR to foreclosure include:

● Saving money by avoiding legal costs.
● The bank may forgive the existing debt if the homeowner obtains an all cash offer for a short sale.
● Protecting the homeowner’s credit.
● Homeowners, rather than potential buyers, can benefit from the market.

No one wants to be in the shadows of a potential foreclosure. However, sometimes life happens and we find ourselves in unfortunate circumstances. If you are debating what your next step should be, it may be time to consult with the professionals.

We here at Gulf State Homebuyers have years of experience assessing and purchasing homes. Contact us, and we would be happy to provide you with a FREE consultation on what your options are for the future. Don’t give up – we are here to help!  Check out our other articles about foreclosure here.

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