If you find yourself facing foreclosure work in VA (or even threatened by the prospect of it), it’s absolutely critical to understand how the foreclosure process works in VA.
Understanding the Foreclosure Process in VA
What is foreclosure anyway?
Legally, foreclosure is the official process by which a mortgage lender attempts to take back real estate property (a home) securing a loan (a mortgage) – usually after a borrower (or a homeowner) stops making payments.
By no means is foreclosure fun, but it’s not the end of the world.
By knowing how foreclosure works in VA… you’ll be much better equipped to navigate it well and come out on the other end in the best position possible.
Stages of the Foreclosure Process
Foreclosure works differently in different states around the country, but there are a few stages that are important to any foreclosure process.
There are generally two ways different states use to foreclose upon a property: judicial sale or power of sale.
Connect with us through our contact page or by calling us at (703) 499-0111 to have us walk you through the specific foreclosure process here in Fairfax.
In either scenario, a foreclosure action typically doesn’t make its way to court until 3-6 months of missed payments. Usually (but not always), a lender will send out several notices letting you know that you’re 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.
- You’ll have 30 days to bring payment to court to avoid foreclosure (sometimes that can be extended).
- If you don’t pay after this period, a judgement will be entered and the lender can request the sale of your property – generally through an auction.
- Once the property is sold, the local sheriff serves an eviction notices and you must vacate the property.
Under Power of Sale (Non-Judicial) Foreclosure:
- The lender serves you with a notice demanding payment, and the courts are not required – although there may be some level of judicial review.
- After the established waiting period has gone by, a deed of trust is drawn up and control of your property is transferred to a trustee.
- The trusteed can then sell your property to the lender at a public auction (notice must be given).
So, What Happens After A Foreclosure Auction?
After a foreclosure is complete, the amount of the loan is paid off with the proceeds from the sale of the property.
Sometimes, if the sale of the property isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower. A deficiency judgement is where the bank gets a judgement against you, the borrower, for the remaining funds owned to the bank.
Some states limit the amount owed in a deficiency judgement to the fair value of the property at the time of the sale, while other states will allow the full loan amount to be asssesed.
Generally, it’s best to try to avoid a foreclosure auction. Instead, call up the bank to negotiate, or work with a local, reputable real estate firm like us at Del Aria Investments to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced invested can help you by negotiating directly with the banks – or even eliminate the prospect of a foreclosure, even if your home is worth less than you owe.
If you’re currently facing foreclosure and need to sell a property near Fairfax, please let us know. We can help!
We buy houses in Fairfax, VA like yours from people who need to sell fast!
Nonjudicial vs judicial process
Whether you’re facing foreclosure in Virginia or anywhere else, there are several different ways to go about getting your home back. The process of foreclosure is different for each state, so be sure to look into the laws of your state before you decide on one method or the other.
The main difference between nonjudicial and judicial foreclosures is that nonjudicial foreclosures occur outside of the court system. Nonjudicial foreclosures are easier and quicker for lenders, while judicial foreclosures take longer and involve more red tape. Depending on your state, the nonjudicial foreclosure process could take up to a few months, whereas judicial foreclosures can take years.
In Virginia, most foreclosures are nonjudicial. This means that if you have a deed of trust and the lender has given you a power of sale clause, then you may be able to get back your home without filing a lawsuit. You may also be able to negotiate with your lender if you need time to catch up on missed payments.
Post-sale redemption period
During the process of foreclosure, the borrower may be entitled to redeem their home. This process will involve paying the lender the difference between the sale price and the loan amount, plus six percent interest.
There is no rule of thumb as to how long it takes to redeem a property. However, there are some guidelines that may help to speed up the process. In most cases, borrowers have a sixty day window to redeem their property after the foreclosure sale.
A nonjudicial foreclosure is a process in which the lender carries out all of the legal requirements of a foreclosure outside of a courtroom. This process can take as little as sixty days, but may require up to six months to complete.
A judicial foreclosure is a process in which the loan is sold at a foreclosure auction to the highest bidder. Typically, the lender will make a credit bid at the sale. This may be the most important part of the process, since the lender can seek a personal judgment against the borrower for the difference between the sale price and the loan balance.
Fees are subtracted from your VA entitlement
Using a VA loan to purchase a home does not require a down payment, but your entitlement is a key factor in determining the size of your loan. If you have less than $144,000 in entitlement, you will not be able to buy a home priced at $80,000, for example.
The Department of Veterans Affairs guarantees up to 25% of your loan amount. In most areas of the country, that limit is $647,200 in 2022. However, there are some areas where the limit is higher.
The VA loan entitlement varies from county to county, so it is important to know the rules before applying. For example, if you live in a high cost area, your limit might be higher.
If you have been approved for a VA loan and your home has been foreclosed on, you will have lost your entitlement. However, you can regain your entitlement by paying off your loan in full. If you do not have enough money to pay off your loan, you can sell your home to pay off your loan. If you are unable to sell your home, you can contact your loan servicer to work out a payment plan.
Legal options to avoid losing your home or declaring bankruptcy
Whether you’re a first-time homeowner in Virginia, or you’re a seasoned homeowner facing a foreclosure, you need to know your legal options to avoid losing your home or declaring bankruptcy during foreclosure. Foreclosure can occur very quickly, and having a basic understanding of the process can give you a head start.
Generally, the foreclosure process starts with a lender filing a lawsuit. The lender then serves a notice of sale to the homeowner. The homeowner is then given a chance to stop the sale.
The notice of sale also includes information about legal aid and HUD-approved housing counselors. The new owner must comply with state landlord-tenant eviction laws. Often, the notice will be served automatically. A drive-by inspection is usually conducted to ensure the home is occupied and in good repair.
A new owner can also serve a Writ of Possession to get the tenants out. The Writ of Possession does not require a court hearing. However, a 10-day waiting period is required.