How does a property foreclosure work?

Due to the continuous economic upheaval in India caused by the new Corona virus outbreak. More house loan EMI payments have failed, causing banks to turn to various recovery methods. One of these is the complicated and upsetting procedure of property foreclosure. In which the bank sells the property on the open market to recoup the money owed to them by the borrower.


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What is a foreclosure on a home?

The fundamental premise of foreclosure is straightforward. A foreclosure is defined by the Oxford Dictionary as “the process of taking ownership of someone’s property since they have not paid it back money borrowed to buy it.”

If your EMI default duration exceeds six months, your house loan agreement contains a clause that provides the lender the ability to repossess and sell your home.

After three missing EMI payments, banks usually start sending letters concerning property seizures. The borrower has 60 days to file an objection. If the borrower fails to do just that, the property will be repossessed and the foreclosure procedure will begin.

In significant publications, advertisements for the foreclosed property are placed, requesting bids with a minimal reserve price. Notices of the auction are also post on the bank’s official website and social media pages. Following that, the bank holds an open market foreclosure auction of the property to recoup the unpaid debt.


How does a property foreclosure work?

When does a bank begin foreclosure proceedings on a property?

If the borrower defaults on the loan the EMIs on time. A common misconception regarding home foreclosures is that banks are ready to begin the foreclosure process. While it is accurate that a lender will go to any length to recover money owed to it, property foreclosures is never the first option. Banks will simply levy a penalty if you default on your home mortgage EMI payments for the first time. They only become concerned and begin sending letters after the default has been in place for three months. If the default persists for six months, the property will be foreclose on.

It’s worth noting that repossessing homes and selling them at auction is a complicated and time-consuming procedure that necessitates extensive due diligence as well as large financial outlays. In fact, most Indian banks engage third-party companies to complete the foreclosure process since the costs are so expensive and the process is so difficult. That is why, unless it is absolutely essential, banks will not initiate the property foreclosure procedure.


How does a property foreclosure work?

How can you avoid a property foreclosure?

Avoiding the lender in times of financial hardship is one of the most common blunders borrowers make. Even if you are temporarily unable to pay your house loan EMIs, engaging with your bank is critical to avoid property foreclosure. Any financial expert will advise you that you must notify your bank of any circumstances that may prohibit you from paying your EMI on time. Even if the bank continues to impose a penalty. It is in your best advantage for the bank to recognise that the circumstance is temporary and that you intend to pay in full in the future.

However, simply expressing your noble intentions will not suffice. Your repayment history & previous encounters with the bank will serve as evidence for the bank to believe you and provide you a helping hand when you are in need. As a result, it is critical to keep a solid credit score and bank relationship at all times.


Should you invest in a foreclosed home?

Investment in a foreclosed property has advantages and disadvantages, just like any other investment. Because the bank is eager to sell the property and recoup its funds. It is frequently offer for less than its market price, making it an appealing option for buyers.

The new owner, on the other hand, will be accountable for all legal, financial, and, most crucially, physical obligations that come with foreclosed property. If the former owner as well as his tenant refuses to leave. He or she will be required to pay any outstanding utility bills and evacuate the premises. Investing in foreclosed houses only makes sense if the price is low enough. That the buyer is willing to accept the additional responsibilities that come with the purchase.


Housing finance is another source of stress. If you want to secure a house loan to buy a foreclosed property. You’ll have a hard time finding lenders who will help you. Normally, the transaction had to be complete with your funds.





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Disclaimer: The views of this expressed above are for informational purposes only based on the industry reports & related news stories. does not guarantee the accuracy of this article, completeness, or reliability of the information & shall not be held responsible for any action taken based on the published information.
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