The basic contract for foreclosures can be called a power of sale. This is a contract wherein the lenders have the right to repossess the property and evict the owner if the homeowner defaults in his promise to pay the mortgage amount. A mortgage is a debt by which the property itself is lent to the homeowner. If the homeowner is unable to pay this loan, he is free to sell the property to recover his dues.
The lenders usually give mortgage loans to homeowners who have good credit. So, whenever a homeowner defaults in his payments, they ample options in repossessing the property and eventually selling it in order to recover the lost money.
Actually, selling a property is not very easy. In fact, a lot of agreement must be done between the lender and the distressed homeowner before the property can be sold.
In many states in America, the basic contract for foreclosures is called a “power of sale” rather than a deed of sale. This is because foreclosure is not a legal proceeding, but a power of sale, which permits the lender to bypass the formal process. The basic format of a power of sale contract is very simple and easy.
In a power of sale, all the terms and conditions between the lender and the homeowner must be carefully noted and indicated so, that there is no confusion later on. Once the buyer and the homeowner have understood and agreed to all the terms of the power of sale contract, there is no further hassle for the parties.
The elementary elements of a power of sale contract are the precontract, the conditional promises, and the sale price. The conditions and promises mentioned in the power of contract spell the complete and necessary terms that the homeowner must abide, once he has acquired the powers. Failure to comply to any of the conditions would hold the homeowner responsible for breach of contract and may result in immediate eviction.
The conditionalty promises are similar to the requirements for a standard deed of trust. However, they do not demand collateral for the mortgage. Instead, these types of mortgages require the homeowner to serve as collateral for his loan. In that case, the requirements are similar to the requirements of a mortgage loan for a deed of trust. There is no risk involved in it. Though, the mortgage lender may ask the borrower to place collateral or something that could be used to retrieve the money so he can serve as a collateral for his loan.
It greatly differs from the bank mortgage in a number of ways. The initial conditions in the power of sale contract stipulate that the home must be the homeowner’s primary residence. Moreover, it must be the owner’s representative. Even if the borrower has ahare interestin the property, he cannot be head of the house.
The Napkin(a) Rule
The Napkin(a) is one of the oldest and the most commonly known contracts of property sale. This rule states that the actual sale price must all be at least twenty percent greater than the amount that is due under the mortgage, including the various fees, which are usually incorporated in the mortgage agreement.
The mortgage agreement states the names, addresses, contact numbers, and contact information of both the lender and the borrower. This contract is also effective even if it contains a mortgage language. The contract is basically the list of terms and conditions between the lender and the borrower that are specific to the mortgage contract.
The contract does not always reflect the final values of the transaction. Sometimes, the amount stated in the draft or the statement is not updated until the last details of the real estate transaction are incorporated in the final documents.
So if you are planning to sell your real estate property, you would want to engage the services of a reliable real estate professional to ensure a smooth and successful transaction.