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Types of Foreclosure

The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. Within the United States and many other countries, several types of foreclosure exist. Two of them namely, by judicial sale and by power of sale – are widely used, but other modes of foreclosure are also possible in a few states.

Foreclosure by judicial sale, more commonly known as Judicial Foreclosure, is available in every state and required in many, involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state. A judicial decision is announced after pleadings at a usually short hearing in a state or local court. In some fairly rare instances, foreclosures are filed in Federal courts.

Foreclosure by power of sale, which is also allowed by many states if a power of sale clause is included in the mortgage. This process involves the sale of the property by the mortgage holder without court supervision. It is generally more expedient than foreclosure by judicial sale. As in judicial sale, the mortgage holder and other lien holders are respectively first and second claimants to the proceeds from the sale.

Other types of foreclosure are considered minor because of their limited availability. Under strict foreclosure, which is available in a few states including Connecticut, New Hampshire and Vermont, suit is brought by the mortgagee and if successful, a court orders the defaulted mortgagor to pay the mortgage within a specified period of time. Should the mortgagor fail to do so, the mortgage holder gains the title to the property with no obligation to sell it. This type of foreclosure is generally available only when the value of the property is less than the debt. Historically, strict foreclosure was the original method of foreclosure.

Foreclosure Investment Properties

Some individuals and companies in the USA are engaged in the business of buying properties at near wholesale prices at foreclosure sales. Distressed assets like foreclosed property or homes are considered by some to be worthwhile investments because the bank or mortgage company is not really very motivated to sell the property for more than is owed against it.

The number of households in foreclosure increased dramatically, with about one of every 100 U.S. households at some stage of the foreclosure process, according to the latest numbers from data aggregator

The United States of America (U.S.) Department of Justice Antitrust Division announced the launch of a new web site in October 2007 to "educate consumers and policymakers about the potential benefits that competition can bring to consumers of real estate brokerage services and the barriers that inhibit that competition." Among other findings, they report that certain new sales models can reduce consumer home sales costs "by thousands of dollars. For example, in states that allow open competition, some buyer's brokers rebate up to two-thirds of their commission to the customer, and some seller's brokers offer limited-service packages that let sellers list their homes on the local multiple listing service (MLS) for as little as a few hundred dollars