Foreclosure in Texas: A Complete Overview (eg, Right of Redemption, Deficiency Judgments, the Auction Process & More)
ForeclosureBusinessNews.com: “Foreclosure News the Average Joe Can Use!”
If you’re facing foreclosure in Texas, following is a complete overview of the process. We’re going to start with the Right of Redemption law, because that’s what many homeowners want to know about as they’re desperate to stop foreclosure.
What is the Right of Redemption?
As explained in the post, Right of Redemption Laws: How to Get Your Home Back – Even After It’s Sold as a Foreclosure:
In the home foreclosure process, there is a period of time where the former homeowner can buy back their property from the person who bought it at auction. This period is known as the “redemption” period.
This post also outlines 7 specifics every homeowner (and potential buyers of property) needs to know about this stop foreclosure law, because it’s very intricate and varies from state to state.
Texas Foreclosure Laws: Texas is a Non-Judicial Foreclosure State
This means there is no right of redemption law in Texas. It also means the foreclosure process can proceed relatively quickly because, in ayman’s terms, all “nonjudicial foreclosure” means is that the person who owns the deed (mortgage) to the property – and this is usually a lender – doesn’t have to go to court to foreclose.
There is some hope though, so read on.
Foreclosures in Texas: Homeowner Rights When There are No Right of Redemption Laws
However, all is not lost, homeowners still have a glimmer of hope if they want to prevent foreclosure, because of the following.
Stopping Foreclosure in Texas: Why Every Homeowner Facing Foreclosure Should Know about “Power of Sale” Language
In non-judicial foreclosure states, there are usually very strict legal notice requirements that deed/mortgage holders to a property must file before a foreclosure can take place.
For example, in Texas, if language known as “Power of Sale” is included in the deed/mortgage documents, then a homeowner must be given at least 20 days to cure any default (ie, catch up on all mortgage arrears).
So the lender must mail the homeowner a first letter (Notice of Default) before the clock starts ticking. Right there, that’s almost 3 week – not a lot of time, but something – for homeowners to take “prevent foreclosure” action.
After this, the lender must then mail the homeowner a second letter. In this second letter, the lender lets the homeowner know that their home loan has been “accelerated.” This is simply legalese that says, “Hey, Mr. Homeowner we’re speeding up the process. Pay all past due balances now because your home has been scheduled to be sold on the auction block.”
It’s when you get this second notice that you’re really running out of time.
BUT even then, as a homeowner you still have options. Usually at this point, they’re pretty severe.
Should You File Bankruptcy to Prevent Foreclosure in Texas?
For example, you can file bankruptcy. Filing bankruptcy halts all foreclosure proceedings. Learn the pros and cons of filing bankruptcy to prevent foreclosure.
Note: If there is no “Power of Sale” language in your deed of trust (mortgage) paperwork in Texas, a lender must then go the judicial foreclosure route. This is a longer, more expensive process, which usually works in the favor of homeowners trying to stop foreclosure.
As explained in the post, California Foreclosure Law: How to Stop Foreclosure Even If Your Home Is Sold at Auction, judicial foreclosures:
. . . are handled via the court system, hence the name “judicial.” What happens is, a lender files a complaint that outlines what the debt is and why they should be able to proceed with the foreclosure. Once the lender files, the homeowner is then served and both appear in court to resolve the process.
If the court finds for the plaintiff (the lender), it will issue a judgment for the total amount owed on the loan, PLUS the costs of the foreclosure process – up to and including all legal fees.
The Foreclosure Process in Texas: How Long Does It Take?
If “Power of Sale” language is in the deed of trust/mortgage paperwork, all proper procedures are followed and a homeowner doesn’t put up any type of fight (eg, filing bankruptcy), the foreclosure process can be completed in Texas in as little as 60 to 90 days.
Foreclosure Sales in Texas: The Process of Auctioning off a Property
In Texas, unlike in some states, lenders aren’t required to publish a notice of sale in the local newspaper. A notice of sale is filed with the county clerk’s office three weeks (21 days) before the sale takes place.
Foreclosed properties in Texas are sold off on the steps of the county courthouse between 10 a.m. and 4 p.m. on the first Tuesday of the month, irrespective of holidays.
Texas Foreclosures: Why Lenders Bid on Their Own Properties
Properties are sold to the highest bidder, which could be the lender themselves. Most lenders only want the sale to bring enough to cover what’s owed on the mortgage. So, if a property sells for at least this amount – whatever it is – then a lender won’t bid.
However, they will bid to protect their interests; so a “bottom bid” is in essence, in effect. For example, if $100,000 is owed on the house, then a lender wants the property to sell for at least this amount. So, the lender themselves will bid at least this amount.
If a property sells for more than is owed on the mortgage, then the property goes to the highest bidder, as stated above. The sale must be paid for in cash – usually the same day.
Foreclosure Auctions in Texas: What Happens When a Foreclosed Property Sells for Less Than Is Owed On It?
Homeowners may have to come out of pocket, ie, they can be sued by lenders for what’s known as a “deficiency judgment.”
Post Continued Below: Register Your Foreclosure Cleaning Business with HUD & Other Government Contracting Agencies to Get Foreclosure Clean Up Contracts Click below learn how.
Copyright Violation Notice: If you’re reading this entire post (snippets are fine) on any blog other than ForeclosureBusinessNews.com, it is stolen content. Scraping content (eg, using software to illegally copy and paste copyrighted content from websites and blogs) is becoming a common practice which affects every site owner. So if you see this content someplace else, please take a quick moment to send an email to [info]at[ForeclosureBusinessNews.com] (remove brackets, of course) so that we can take the appropriate action. Thank you in advance for your help.
Texas Foreclosure Laws: About Deficiency Judgments in Texas
How a deficiency judgment is calculated in Texas?
An appraisal has to be done on the property first to determine what the “fair market value” of it is.
This can be good news or bad news for the homeowner because it doesn’t matter what you paid for the property or what it sold for at auction, the deficiency judgment will be calculated as the difference between what an appraisal determines what the current “fair market value” of the property is” and the amount that was owed on the property when it was sold.
So, if you bought your home at the height of the real estate market when prices were inflated, and the bottom has fallen out leaving you underwater, then you could be stuck owing quite a bit.
Conversely, if you bought in a “normal” market, or were lucky enough to buy below market value (eg, a short sale, a foreclosure), or have been in your home a long time and don’t owe much on it, then you probably won’t owe as much in a deficiency judgment, and might even get money back after the sale of your home at auction. See the section on “overbid funds” below.
Texas Limits on Deficiency Judgments
In Texas, lenders have two years from the date of auction to bring this suit against a homeowner.Any deficiency judgment may be limited or offset if the market value of the property is more than price obtained when the property was sold at auction.
Get Expert Help with Foreclosure in Texas
FYI, here is a list of limits on deficiency judgments broken down by state. As stated in this post, take note that laws change constantly, especially in these trying times, so check with a real estate legal/financial expert (eg, bankruptcy lawyer, real estate lawyer, tax attorney) in your state for current law as it relates to your situation.
Foreclosure Auctions in Texas: What Happens When a Foreclosed Property Sells for More Than Is Owed On It?
If the bid amount is more than the amount owed on the property, remaining monies go to what’s known as secondary or junior lien holders.
How Foreclosed on Homeowners in Texas Can Still Get Money Even After Their Home Is Sold at Auction
Did you know that it’s possible for your home to be sold at auction and you still receive money? It’s true.
As discussed in the post, How to Lose Your Foreclosed Home at Auction and Still Receive Thousands of Dollars, it’s a concept known as “overbid funds.” And, many homeowners lose out because they’ve never even heard of it.
Learn how to collect any overbid funds you may be owed if your home is sold at auction in Texas.
P.S.: Like this post? Follow Foreclosure Business News on Twitter.
©2011; Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.