Foreclosure by judicial sale, commonly called judicial foreclosure, involves the sale of the mortgaged property under the supervision of a court. The proceeds go first to satisfy the mortgage, then other lien holders, and finally the mortgagor/borrower if any proceeds are left. Judicial foreclosure is available in every US state and required in many (Florida requires judicial foreclosure). The lender initiates judicial foreclosure by filing a lawsuit against the borrower. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state in the US. A judicial decision is announced after the exchange of pleadings at a (usually short) hearing in a state or local court in the US In some rather rare instances, foreclosures are filed in US federal courts.

In 2010, there was a 14% increase in the number of homes receiving a default notice between July and September. In that year one in every 45 homes received a foreclosure filing and the problem has become more widespread with the increasing rates of unemployment across the nation. Banks have become extremely aggressive without much patience for those who have fallen behind on their mortgage payments, and there are more families entering the foreclosure process sooner than ever. In 2011, banks were on track to repossess over 800,000 homes.[33] In 2010, the highest rates of foreclosure filings were in Las Vegas, Nevada; Fort Myers, Florida; Modesto, California; Scottsdale, Arizona; Miami, Florida; and Ontario, California. The geographic diversity of these cities is made up for by the fact they these are all relatively metropolitan areas. Big cities like Houston, Texas saw a 26% increase in 2010, 23% in Seattle, Washington and 21% in Atlanta, Georgia. These cities had the lowest rates of unemployment. On the opposite end of the spectrum, the cities with the lowest rates of foreclosure were Rome, NY; South Burlington, VT; Charleston, WV; Bryan, TX; and Tuscaloosa, AL.[34] Not surprisingly, these areas had some of the highest nationwide rates of unemployment, helping to further demonstrate this correlation. A quote from RealtyTrac CEO James Saccacio summarizes the recent trends:
If you have a lease-purchase contract, you may be legally obligated to buy the property when the lease expires. This can be problematic for many reasons, especially if you aren’t able to secure a mortgage. Lease-option contracts are almost always preferable to lease-purchase contracts because they offer more flexibility and you don’t risk getting sued if you are unwilling or unable to buy the home when the lease expires.

In some US states, particularly those where only judicial foreclosure is available, the constitutional issue of due process has affected the ability of some lenders to foreclose. In Ohio, the US federal district court for the Northern District of Ohio has dismissed numerous foreclosure actions by lenders because of the inability of the alleged lender to prove that they are the real party in interest.[9] The same happened in a Colorado district court case in June 2008.[10][11]
In a rent-to-own agreement, you (as the buyer) pay the seller a one-time, usually nonrefundable, upfront fee called the option fee, option money or option consideration. This fee is what gives you the option to buy the house by some date in the future. The option fee is often negotiable, as there’s no standard rate. Still, the fee typically ranges between 2.5% and 7% of the purchase price.
It’s critical to sign an agreement that is in your best short- and long-term interests. The rent-to-own option will cost more than a traditional home rental because there are other costs baked into the monthly amount. The good news is these “other costs” such as the initial option fee and monthly credit will go toward the final purchase price. Nevertheless, a rent-to-own contract should always include the length of the rent-to-own lease agreement (usually anywhere from 12­ to 70 months), the amount of initial option fee (usually 35 percent of final purchase price), the final purchase price at the end of the term, and the amount of the monthly payments that will go toward the purchase price. These figures are all negotiable.
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