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Investing in Texas Foreclosures
While investing in Texas foreclosure property carries the same benefits and profit potential as investing in other states, there are differences to investing in Texas property. Texas carries its own unique property and foreclosure laws.
Unlike most states, Texas bank foreclosures are non-judicial. This means lenders do not need a court order to be able to foreclose on property when the owner is in default. Instead, the lender follows the Texas Property Code for all foreclosure proceedings.
The Texas foreclosure process works differently than in states where foreclosures are settled by the court. In Texas, if the home falls into the homestead category, then the lender appoints a trustee to serve the owner with a demand letter. This letter is a private letter, with no copy filed in the county records, informing the owner of the default and pending foreclosure. The lender must then wait a full 20 days before public posting the property as a foreclosure.
If the property is not homestead property, or the 20-day period has passed, the lender is permitted to post a trustee sale notice. This notice, declaring that the property will be sold as a foreclosure, must be filed at least 21 days before the sale.
In most foreclosure proceedings, the property is auctioned to the highest bidder on the sale date. In Texas foreclosure proceedings, the trustee sells the property for the loan balance, plus legal fees, interest and penalties.
The primary disadvantage to buying a foreclosure is that Texas law does not allow the loan amount to be disclosed in any way. This presents a difficulty for anyone attempting to determine whether a profit can be made based on the cost of acquiring the property.
Tax foreclosures in Texas are judicial, and they do require a court order. In addition, they must follow the Texas Property Code. Once permission is granted for a tax foreclosure, a notice is posted. After 21 days, the property is sold at a sheriff’s auction.
There are two main benefits to buying a Texas foreclosure at sheriff’s auction:
1. When the property is sold at sheriff’s auction, the property is sold for the amount of delinquent taxes. This provides the opportunity for acquiring the property at a substantial discount.
2. Under Texas law, the property owner has the right to reclaim the property after auction. In order to do this, they have to pay the buyer at least 25% over the amount paid at auction. This allows a buyer to sell the property back to the owner, who may not want to give up the property, at a profit.
An additional benefit to purchasing foreclosures of either type is the advance notice given of the sale. In both cases, a notice is required to be posted at least 21 days prior to the sale. This provides a potential buyer the opportunity to research the property through court records prior to the sale.
Texas foreclosure property is sold on the first Tuesday of every month. These sales take place regardless of whether that Tuesday is a holiday.
About the Author: Alex Diaz has written widely on foreclosure and real estate. Visit his website, Foreclosure Deals for information on Texas Home Foreclosure Listings and foreclosure listings