Legal
Foreclosure
The legal process through which a lender takes ownership of a property when the borrower fails to make mortgage payments. Foreclosure severely damages your credit score and can remain on your credit report for seven years. The process varies by state and can take months to over a year. If you are facing foreclosure, explore alternatives like forbearance, loan modification, a short sale, or a deed in lieu of foreclosure.
Why It Matters
Foreclosure carries legal significance in real estate transactions. Property law, contract law, and lending regulations all intersect when buying a home, and terms like foreclosure have specific legal definitions that affect your rights and obligations as a buyer or homeowner.
While real estate agents and lenders can explain general concepts, for questions about foreclosure that could have significant financial or legal consequences, consulting a real estate attorney is worth the $200-$500 cost. In some states, attorney involvement in real estate closings is mandatory.
Real-World Example
Legal issues related to foreclosure can surface during title searches, contract negotiations, or closing. Catching problems early is far less expensive than resolving them after you've closed on the property.
Pro Tip
If you're buying in a state that requires attorney closings (CT, DE, GA, MA, NY, SC, WV, and others), your attorney will handle foreclosure-related legal matters. In other states, consider hiring one independently for a review of your purchase contract.