Note Investing in Judicial and Non-Judicial Foreclosure States
When you start note investing in judicial and non-judicial foreclosure states there is a lot of information to take in and feel like you need to retain in order to keep track of how each state works. Like we mentioned in the Ultimate Guide to Note Investing Due Diligence, having the right members of your power team in place, like foreclosure attorneys, will help set you up for real estate note investing success. Just like a set of tools in a toolbox, every member of your note investing team has their own specialization, which should only be used at the appropriate times.
You want to use your foreclosure and bankruptcy attorneys when you need them to do the heavy lifting. Attorneys are specialized parts of your team, that come at a very high cost. For that reason, I continually work to expand my knowledge about real estate note investing and the laws intimately surrounding the note investing space. In this post we’re going to talk about note investing in judicial and non-judicial foreclosure states. I’m also going to share a great resource that I’ve put together to help you navigate state foreclosures and find state foreclosure statutes quickly.
Why do Foreclosures Happen?
Foreclosures is a legal means by which Mortgagors (e.g. banks, financial institutions, note investors) recover their capital from a Mortgageee (i.e. borrower) that has defaulted and stopped making payments on a note. Mortgages or deeds of trust secure an underlying property, which serves as the Mortgagors collateral for an associated real estate note. Basically if a borrower stops making payments on a promissory note, they can ultimately lose their property through foreclosure.
Differences Between Judicial and Non-Judicial Foreclosures?
The main difference between note investing in judicial and non-judicial foreclosure states is the cost and associated time frames. A judicial foreclosure must be completed through a lawsuit by the Mortgagor. In addition, lengthy court procedures must be performed before the property can ultimately go to foreclosure. Contrasting, a non-judicial foreclosure does not have any court proceedings, and usually much faster than a judicial foreclosure.
Quick Rule of Thumb:
Judicial = Longer & More Expensive
Non-Judicial = Shorter & Cheaper
Costs of Judicial and Non-Judicial Foreclosures?
Fannie Mae regularly publishes their Allowable Foreclosure Attorney Fees exhibit, which breaks down allowable foreclosure fees across the United States. This Fannie Mae publication serves as a good starting point for costs associated with note investing in judicial and non-judicial foreclosure states. However, don’t forget that there are additional costs that go into foreclosure, such as publication costs. These additional administrative costs usually add up to around 40% of the total cost of foreclosure, on top of Fannie Mae’s published foreclosure attorney fees. Regardless of the type, a foreclosure is expensive and time-consuming, which is why they are also one of the last options that real estate note investors pursue against borrowers.
Interactive Map of Judicial and Non-Judicial Foreclosure States
Map Directions:
This interactive map may help serve as a reference when note investing in judicial and non-judicial foreclosure states. Click on a state in the interactive map below to be directed to that state’s specific foreclosure statutes.
Green states are exclusively non-judicial foreclosure states, red states are exclusively judicial foreclosure states and blue states have a combination of either judicial or non-judicial foreclosures. The annotations for blue states specify whether the state primarily deals with judicial or non-judicial foreclosures. Finally the annotations also provide the appropriate state foreclosure statues.
Closing Thoughts
I hope that this interactive map will help you start to navigate the sea of information about note investing in judicial and non-judicial foreclosure states. Also, if nothing else use this as a reference to narrow down your investment markets across the United States. You can also use this map for your note investing due diligence. In addition, if you found this interactive map useful, you can also check out our map of superior lien states that cover HOA and COA super liens.
Are you new to real estate note investing? Learn more about what real estate note investing is here, or learn more about NoteVestment.com. If you would like to dive more into note investing due diligence, check out NoteVestment.com’s Ultimate Guide to Note Investing Due Diligence which is a deep dive into the wide world of note investing due diligence.
As always, thanks for reading!
Disclosure Statement: This article, also called a blog post, contains pertinent information and resource links to legal information, or information that may be construed as legal information, or guidance, aimed at helping the readers of NoteVestment.com with any number of aspects of real estate note investing. While I spend countless hours researching and sourcing the latest information pertaining to this article, or blog post, know that federal and state statutes are subject to change at anytime after the publication of this article, or blog post. Note that I am not a licensed attorney and all information in this post should not be seen as legal advice. You should consult with a licensed attorney to obtain professional legal advice before acting upon any of the information provided in this article, or blog post.
