Understanding the foreclosure process in Kentucky is an important part of navigating your own home foreclosure in making the best decision for yourself.
Before we dive in…
Understanding the Foreclosure Process in Kentucky
What is foreclosure anyway?
Understanding the foreclosure process in Kentucky is key to navigating the financial turbulence of potentially losing your home. But what is foreclosure, exactly? It’s a legal process that lenders initiate when a homeowner defaults on their mortgage payments.
In essence, it’s a repossession tactic. If payments are consistently missed, the lender, typically a bank, has the right to reclaim the property to recover the outstanding loan amount. This, invariably, includes selling the home.
In Kentucky, we primarily observe judicial foreclosures, requiring the lender to go through the court system. , A detailed and drawn out process, it’s a process that offers homeowners an opportunity to make the situation right again or give you time to sell your home in Kentucky
The Basic Stages of A Foreclosure In Kentucky
There are a few stages that are important to any foreclosure process and it is important that you know what those are.
Foreclosure works differently in different states around the country so the rules are different for each place.
The two ways different states use to foreclose upon a property are: judicial sale or power of sale.
Connect with us by calling 502-461-1450 or through our contact page to have us walk you through the specific foreclosure process here in Kentucky.
Foreclosure usually hits court after 3-6 months of skipped payments. Lenders often send many ‘payment overdue’ notices before it gets to that point. A lot of times lenders are willing to work with you on your mortgage if you have a plan to get current or pay it off.
Under Judicial Foreclosure:
- Your mortgage lender must file suit in the court system to start the process.
- You’ll get a letter from the court demanding payment of the property.
- 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 immediately.
Under Power of Sale (or Non-Judicial Foreclosure):
- 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 to control.
- The trustee can then sell your property to the lender at a public auction (notice must be given prior).
For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction after the 1st position mortgage is paid off on the property.
What Happens After A Foreclosure Auction In Kentucky?
After a foreclosure is complete in Kentucky, the loan amount is paid off with the sale proceeds of the property.
Sometimes, if the sale of the property at auction in Kentucky isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower. For example if the property only sold for $100,000 and the total debts owed were $125,000.
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 to hold you liable for the remaining amount.
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, Kentucky unfortunately does allow Deficiency Judgements
Generally, it’s best to avoid a foreclosure auction. Instead, call up the bank loan officer, or work with a reputable real estate firm like us at Louisville Cash Real Estate to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure or give you an offer for your home so you can sell it quickly.
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. Alot of times we can even purchase your house if you owe around what the house is worth through owner financing.
If you need to sell a property near Louisville, we can help you. Call us at 502-461-1450 or fill out our form below for your cash offer today.
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