If you are in pre-foreclosure or are at risk of losing your home due to outstanding mortgage payments, it is important to fully understand the Texas foreclosure process.
Understanding the Texas Foreclosure Process
What is foreclosure?
Foreclosure is the legal process that lenders use to recover the balance of a loan from a borrower when they have failed to make payments.
Foreclosure can be intimidating, but understand that you still have options.
Once you better understand the Texas foreclosure process, you can arm yourself with the knowledge needed to navigate your way out of this difficult situation.
The Basic Stages of A Foreclosure
In Texas, a lender may foreclose on mortgages or deeds of trusts using one of two methods:
- Judicial Foreclosure
- Non-Judicial Foreclosure or power of sale.
Connect with us by calling (817) 345-6444 or through our contact page to have us walk you through the specific foreclosure process here locally in Dallas Fort Worth.
In either scenario, foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – overdue or behind in your payment.
Under Judicial Foreclosure:
- Your mortgage lender must file suit in the court system.
- You’ll get a letter from the court demanding payment.
- Assuming the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (and sometimes that can be extended).
- 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.
Under Power of Sale (or Non-Judicial Foreclosure):
- The mortgage lender serves you with papers demanding payment, and the courts are 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 to the lender at a public auction (notice must be given).
Anyone who has an interest in the property must be notified during either type of foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.
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 judgment is where the bank gets a judgment against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale.
Some states limit the amount owed in a deficiency judgment to the fair value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.
Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.
Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank, or work with a reputable real estate firm like us at Happy Buy Homes 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 near Dallas Fort Worth, we can help you.
We buy houses in Dallas Fort Worth Texas like yours from people who need to sell fast.
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