Submitted by Neal Heery, REALTOR®, Founding Partner
There are so many options to buy homes in foreclosure. If you’re a considering selling a home during a short sale process or through foreclosure, or if you are considering buying a property in distress, please call. Heery Brothers have been able to help people with some surprising strategies to keep and sell problem properties, or buy homes at an incredible value.
Since this area of real estate is new to so many, we thought you might find this list mortgage and foreclusure related definitions helpful:
Acceleration Clause– A provision that allows the lender to demand the entire balance of the mortgage loan when the borrower fails to make some installment payments.
Affidavit– A written statement, usually given while under oath or in the presence of a notary.
Annual Percentage Rate (APR). The annual interest rate covering the interest and other costs. The Truth in Lending Act requires announcement of APR by lenders.
Appraisal– The process by which a licensed person gives an estimate of property value.
Appreciation– The difference between the increased value of the property and the original value.
Assignment– The transfer of property to be held in trust or to be used for the benefit of the creditors (lenders).
Balloon Payment– Large installment payment required at the end of the term of the mortgage note to pay off the entire mortgage balance.
Bid– The amount for a foreclosed property for sale at auction.
BPO– Brokers Price opinion, a low cost alternative to appraisal in which a real estate agent gives an opinion of market price.
Certificate of Sale– A document issued to the winning bidder at a foreclosure sale stating their rights to the property once the borrowers redemption period has expired.
Clear Title– A title that is not burdened with defects.
Credit Bid– A bid on behalf of the lender at a foreclosure sale. The bid amount must be less than or equal to the balance of the loan in default.
Decree– A judicial decision.
Deed– A signed document that shows ownership in property and allows the transfer ownership of property from one party to another.
Deed-in-lieu of Foreclosure– A voluntary transfer of title by the borrower to the mortgage company to avoid foreclosure action.
Deed of Trust– An instrument signed by a borrower, lender and trustee that conveys the legal title to real property as security for the repayment of a loan. The written instrument in place of mortgage in some states.
Default– A mortgage is in default when the borrower fails to make the payments as agreed to in the original promissory note.
Deficiency Judgment– A judgment against the borrower for the balance remaining after the property is sold at auction or foreclosure sale.
Encumbrance– Mortgage, lien, tax, or any restriction on the use of land.
Equitable Title– The present right to possession with the right to acquire legal title once a preceding condition has been met.
Equity– The value of real estate less the outstanding mortgages and debts pledged against the property.
Fair Market Value– The price a property would sell for on the open market.
Fee Simple – Common term used to indicate complete legal ownership of a property.
FHA– Federal Housing Administration under U.S. Department of Housing and Urban Development (HUD).
Foreclosure – The forced sale of property pledged as security for a debt that is in default.
Free & Clear– Ownership of property free of all indebtedness.
Grace Period– Period between the due and the overdue date during which no late payment penalty applies to the mortgage payment.
Hazard Insurance– Insurance against the destruction of the property.
Judicial Foreclosure– A foreclosure that is processed by a court action.
Lien– A charge upon real or personal property for the satisfaction of a debt.
Legal Description– A formal description of real property so that one can locate it by reference to government surveys or approved recorded maps.
Lender – A person who lends money for temporary use on condition of repayment with interest (i.e., the bank, mortgage company, etc.).
Lis Pendens– A recorded notice of pending lawsuit.
Mortgage – A written pledge of property that is used as security for the repayment of a loan.
Non-judicial Foreclosure– Non-judicial foreclosure is when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of their default.
Notary-A public officer licensed by the state to attest to and certify the validity of signatures of others. A notary is often referred to as a notary public.
Notice of Sale– A notice giving specific information about the loan in default and the proceedings about to take place. This notice must be recorded with the county where property is located and advertised as stated in the security document or as dictated by state law.
Offer– A written agreement from one party to the other to purchase real property. It is only a contract when it is accepted by all parties and meets other criteria.
Personal Property– Property other than real property consisting of things temporary or movable.
Posting – To publish, announce or advertise by physically attaching a notice to an object.
Postponement– Postponement means to put off to a later time. In the case of a foreclosure sale, this is generally done by announcement at the original sale or by posting notices establishing the new date and time the foreclosure sale will take place.
Refinance– Paying off one mortgage loan by obtaining a new mortgage loan.
Right of Redemption – A borrower’s right to reacquire property lost due to a foreclosure. This right allows the owner to recover property lost to a foreclosure judgment, or sold after a foreclosure sale, within a certain period of time. The redemption period varies among the states.
Request for Notice– A recorded document requiring a trustee send a copy of a Notice of Default or Notice of Sale concerning a specific deed of trust in foreclosure to the person who filed the document.
Short Sale– A sale where the lender will agree to accept less than the full amount of the mortgage. This allows you to sell the house to an investor or other buyer for a good price, while the lender recovers the bulk of the amount due without having to pursue foreclosure proceedings.
Subject To– The purchase of a property with an existing lien against the title without assuming any personal liability for the liens payment.
Title– The instrument that is evidence of a person’s right in real property (i.e., a deed).
Trustee– A neutral party who advertises the foreclosure property for sale and conducts the auction to sell said property to the highest bidder.
Trustee Sale (Sheriff Sale)- An auction of real property conducted by a trustee. Also known as a Sheriff’s Sale.
Upset Bid– A recorded bid placed after a foreclosure sale has ended that is higher than the highest bid received at the actual foreclosure sale.
Writ- An order or mandatory process in writing issued in the name of a court or judicial officer commanding the person to whom it is directed to perform or refrain from performing a specified act.