Understanding the foreclosure process in TX is an important part of navigating your own home foreclosure. Rememberl there is always a solution.
Before we dive in…
Understanding the Foreclosure Process in TX
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 just know that it’s not the end of the world.
When you know how foreclosure in TX works… it arms you with the knowledge to make sure you navigate it well and come out the other end as well as possible.
The Basic Stages of A Foreclosure
There are a few stages that are important to any foreclosure process.
Foreclosure works differently in different states around the country.
The two ways different states use to foreclose upon a property are: judicial sale or power of sale.
Connect with us by calling (956) 904 5234 or through our contact page to have us walk you through the specific foreclosure process here locally in McAllen.
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.
Texas uses a combination of a judicial and non-judicial foreclosure, basically it alows for non-judicial foreclosures if the lender or lienholder has adeed of trust. WIthout the deed of trust the lender will need to obtain a court order to proceed with the foreclosure sale.
If the bank has the deedo of trust and if the property if the borrower’s residence then the lender will have to send a Notice of Default or Notice to cure the loan, giving the homeowner at least 20 days to repay any missing payments, late fees, attorney fees and different legal fees. It may be the last opportunity to get the loan payments up to date. Every letter from the bank that piles up ignored on the kitchen counter, makes it more difficult to avoid the foreclosure process.
After the 20 days have passed and the homeowner didn’t got the loan caught up, then the bank will be sending an acceleration letter or notice of sale, notifying the homewoner that the property will be sold in 21 days or more at the next auction.
At this point, the bank is no longer required to accept the amount past due; they are entitled to the whole amount of the loan. If the borrower fails to cure the default, then the bank can proceed by selling the property at the courthouse auction which in Texas takes place on the first Tuesday of every month. If you are facing foreclosure, you should talk to your lender and also get legal counsel.
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 local real estate investment firm like us at Dolfin RGV to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced investors can help you find a solution to your real estate problem. If you need to sell a property near McAllen, we can help you.
We buy houses in McAllen TX like yours from people who need to sell fast any condition.
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Another Foreclosure Resource For McAllen TX HomeOwners: