How Does A Property Get Auctioned Off?
To put it simply, a foreclosure occurs when a borrower is unable to pay off his/her debts, and the lender would then have the right to force the borrower to sell off the asset that was used as his/her collateral.
Foreclosure of Property
- Step 1: The bank will issue you (the borrower) with a letter of warning to remind you to pay up… OR ELSE.
- Step 2: In the 2nd month, a follow-up final warning notice will be issued by the bank.
- Step 3: During the 3rd month onward, the bank’s lawyers will send you letters requesting for you to pay the remainder of your arrears (basically, a legal jargon that refers to the money that is owed) within 14 days.
- Step 4: If you fail to do the necessary payments in Step #3 by the deadline, you’ll be hearing from the bank again! This time, you’ll receive something called a Letter of Facility Withdrawal. This requires you to pay the full outstanding loan amount within a maximum of 14 days.
- Step 5: In the 6th to 7th month, that’s when you’ll be called to appear in court, and the proceedings will depend on your property’s type. This is where the bank’s lawyer(s) will apply for a direction of sales, and an auctioneer will be appointed. The final step will be when a real estate appraiser is engaged in order to set the auction reserve price. Getting the final figure will be based on the current market price, as well as the amount of outstanding loan.
Disposal and Selling of Property
Know Your Homeowner Rights
- Ensure your billing and mailing address is up-to-date in black and white, as the bank might send you final notices that you wouldn’t be able to receive, which could pose a serious problem.
- Make sure that you receive a notice by the bank (required by law) if your property is about to be foreclosed.
- Communicate with your bank to find alternative ways to finance your loan. This can come in the form of restructuring your loan, or renting/selling the property instead.
- Consider selling your home as a sub-sale, if you’re unable to afford the instalment and avoid defaulting on your loan (leaves a black mark on your credit history).
- It would be terrible if you chose to suddenly disappear, leaving your family/next-of-kin to handle all the legal and financial mess that you’ve gotten yourself into.
- Avoid getting into situations that’ll increase the strain on your expenses, as your current finances might not even be enough to sustain your lifestyle and debts/loans.
- In the event you run into financial difficulty, the last thing you’d want to do when talking to the bank, is being shy to ask for help. Even if you’re an introvert or you’re afraid to admit that you’ve fallen on hard times, it’s important to consult your banker early to begin negotiation. Who knows, you could actually get a reduction of the instalment payment, with an extension of the period of the loan too!
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