How Foreclosures Work in East Tennessee

Hi, I'm Sarah Richards with Spring Mountain Realty, and welcome to the podcast. Today's topic is one I get asked about all the time... how foreclosures work in East Tennessee.

Whether you're a buyer looking for a good deal, or a homeowner who's worried about falling behind, it helps to understand how the process works. So let's break it down in plain language.

First, what is a foreclosure? A foreclosure happens when a homeowner stops making their mortgage payments, and the lender takes steps to take the home back and sell it to pay off the loan.

In Tennessee, most foreclosures happen outside of court. That's called a non judicial foreclosure. Most home loans here use something called a deed of trust, which gives a trustee the power to sell the home if the loan goes into default. That can make the process move faster in Tennessee than in some other states.

Here's how it usually goes. First, the homeowner misses payments, and the lender sends letters and notices. Then, if the loan isn't brought current, the lender moves forward. Before the sale, a notice has to be published in a local newspaper, and the homeowner is also sent notice. After that, the home is sold at a public auction, usually at the county courthouse. If no one bids enough at the auction, the home goes back to the lender. That's when it becomes what we call bank owned, or R E O.

Now, if you're a homeowner and you're behind on payments, please hear me. You have options, and the sooner you act, the more options you have. Call your lender and ask about a repayment plan, a loan modification, or forbearance. You may also be able to sell the home before the foreclosure sale. In some cases, if you owe more than the home is worth, a short sale may be possible, where the lender agrees to take less than what's owed. It's also a great idea to talk with a housing counselor or an attorney. The worst thing you can do is wait.

Now let's talk to the buyers. There are really three ways to buy a foreclosure. The first is at the courthouse auction. This can be risky. You often can't go inside the home, you usually need cash or certified funds, and you may be buying the home with problems you can't see. This is usually best for experienced investors.

The second way is buying a bank owned home. After the auction, the bank or the loan company owns the home, and they usually list it with a real estate agent. This is the most common way people buy foreclosures. You can see the home, get an inspection, and use a regular loan in many cases.

The third way is buying a government owned home. These come from loans that were backed by the government. They have their own bidding process, and sometimes owner occupant buyers get the first chance to bid before investors.

So what should you know before you buy a bank owned home? These homes are usually sold as is. That means the bank won't make repairs. The home may have been empty for a while, so there could be issues with the plumbing, the roof, mold, or the heating and air. Always get an inspection. Plan for repairs in your budget. And know that banks can take longer to answer offers, because there may be more than one person who has to sign off.

The good news is that foreclosures can be a great way to get into a home, or to find an investment property here in East Tennessee. You just want to go in with your eyes open, and with someone on your side who knows the process.

At Spring Mountain Realty, we work with buyers looking for bank owned and government owned homes, and we also work with banks and asset managers who need help with these properties. So we see this from both sides.

If you're looking for a foreclosure, or if you're a homeowner who's worried and wants to talk through your options, please reach out. Spring Mountain Realty P L L C... eight six five, nine three five, zero five hundred. Thanks for listening, and I'll see you next time.