What are the steps to, and costs of, the foreclosure process if I purchase a distressed note at a discount?

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What are the steps to, and costs of, the foreclosure process if I purchase a distressed note at a discount?

I am in the due diligence stage of the possible purchase of a distressed note at a discount. The current owner is about a year behind in payments, and is not willing to do a deed in lieu of foreclosure. The note holder would like to sell me the note at a discount, and I would then need to foreclose on the owner. What are the steps to this process, what are the costs, what is the time frame? Should I speak with a real estate attorney? In Washington County, MD

Asked on September 20, 2010 under Real Estate Law, Maryland

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Definitely speak with an attorney first! Every situation is different, so there's no way to effectively generalize. That said--

1) If the homeowner doesn't contest the foreclosure, the actual foreclosure proceeding might be only a few thousand dollars (court, filing, lawyer, recording, etc.)--but if he does contest it (such as by claiming he's made payments or the terms of the note are different), now  you're into real litigation.

2) Similarly, if not contested, it's probably a few months. If contested, it could drag on and on.

3) Before doing anything, you need the note and situation reviewed by an attorney, to see what the legal rights and obligations are; you need an accounting made, to know what still  has to be paid on the note; you need an appraisal of the home, to know what it *should* be valued at; and you need to do a title search to see if there are other notes, liens, security interests, etc. on the home which would prevent you from getting good title.


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