Understanding the Foreclosure Process in TX

Understanding the foreclosure process in TX is an important part of navigating your own home foreclosure.

Before we dive in…

Understanding the Foreclosure Process in TX

What is foreclosure anyway?

Foreclosure is the legal process that lenders use to take back property securing a loan, generally after the borrower stops making payments.

Foreclosure is no fun. But know that it’s not the end of the world.

When you know how foreclosure in TX works… it arms you with the knowledge to make sure you navigate it well and come out the other end as well as possible.

The Basic Stages of A Foreclosure

There are a few stages that are important to any foreclosure process.

Foreclosure works differently in different states around the country.

The two ways different states use to foreclose upon a property are: judicial sale or power of sale.

Connect with us by calling (817) 808-4911 or through our contact page to have us walk you through the specific foreclosure process here locally in Fort Worth.

In either scenario, foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – 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.
Assuming the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (and sometimes that can be extended).
If you don’t pay during the payment period, a judgment will be entered and the lender can request the sale of your property – usually through an auction.
Once the property is sold, the sheriff serves an eviction notice and forces you to immediately vacate the property.

Under Power of Sale (or Non-Judicial Foreclosure):

Most Foreclosures in the state of Texas are Non-Judicial Foreclosures. You may find this Foreclosure Fact Sheet from TexasLawHelp.org helpful in this process.

The mortgage lender serves you with papers demanding payment, and the courts are not required – although the process may be subject to judicial review.
After the established waiting period has elapsed, a deed of trust is drawn up and control of your property is transferred to a trustee.
The trustee can then sell your property to the lender at a public auction (notice must be given).

Anyone who has an interest in the property must be notified during either type of foreclosure.

For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.

Most Foreclosures in Texas Happen In A Three Step Process

Although there are exceptions to the non judicial 3 step process. If there is a home equity loan or a home equity line of credit, or if assessments are owed to a homeowner’s association a court order is usually required before the property can be posted for sale. Also, with some reverse mortgages a court order is required to be able to close the sale.

The other foreclosures happen in these 3 steps:

Step One – The Notice of Default Letter (Demand Letter)will be sent giving written legal notice of 20 days to “cure” or pay in full the amount owed. Most FHA, VA and home equity loans allow 30 days instead of 20 days.

Step Two – Notice of Sale is Posted at the Courthouse, Filed with the County Clerk and Mailed to you. Avoiding opening your certified mail will not delay the sale. The law requires that the notice be mailed to you 21 days prior to the foreclosure sale (auction) The 21 days begin the day the Notice of Sale is mailed to you – not the day you receive it.

Step Three – The Foreclosure Sale happens. Foreclosure sales in Texas happen at the County Courthouse on the first Tuesday of each month. Anyone may bid. After the auction, you do not have a right to buy back your property from the new owner unless it is being sold by a government entity, a tax lender, or for nonpayment of homeowner’s association fees. There are time limits involved, and in some cases, you must pay a redemption fee.

What Happens After A Foreclosure Auction?

After a foreclosure is complete, the loan amount is paid off with the sale proceeds.

Sometimes, if the sale of the property at auction isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.

A deficiency judgment is where the bank gets a judgment against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale.

Some states limit the amount owed in a deficiency judgment to the fair value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.

Here’s a great resource that lists the state by state deficiency judgment laws, since every state is different.

However, In Texas lenders rarely sue for a deficiency because of the time and expense involved. If you are being sued for a deficiency, bankruptcy might be a good option for you.

Can I Stay In My Home During Foreclosure?

You do not have to move out on the sale date. If you are still living in the home after a foreclosure, the new owner will have to evict you. You’ll get a notice to vacate (usually giving three days’ notice) before an eviction is filed. Some lenders will pay moving expenses in order to avoid the time and expense of an eviction proceeding (called “cash for keys”).

How Can I Avoid Foreclosure?

Generally, it’s best to avoid a foreclosure auction if at all possible. There are resources available that may be helpful to you. Lone Star Legal Aid’s Get Help If You Can’t Pay Your Mortgage tool can help you learn what steps you may take if facing foreclosure.

If you are still in the pre-foreclosure phase, call up the bank and ask about Loan Modification or Forbearance. You can also work with a reputable real estate firm like us at Texas Best Home Buyers to possibly help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.

Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate it, even if your home is worth less than you owe.

If you need to sell a property near Fort Worth, we may be able to help you.

We buy houses in Fort Worth TX like yours from people who need to sell fast.