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The foreclosure sale must take place on the first Tuesday of any month, even if said Tuesday falls on a legal holiday, but only after the proper preliminary notices have been given. The sale is on the courthouse steps by auction to the highest bidder for cash. Anyone may bid, including the lender, who bids by canceling out the balance due on the note, or some part of it. This certified letter is called a notice of default and intent to accelerate the debt.
Relief may be limited to a money judgment if the property was sold at foreclosure to a third party for cash (a bona fide purchaser or “BFP”). If a BFP is in the mix, the possibility that the property itself can be recovered by the borrower is near zero. A bank can get a “deficiency judgment” against the borrower for any outstanding mortgage balance that the borrower owes after the foreclosure sale. In Texas, the bank has two years to sue the nonjudicially-foreclosed owner for the deficiency in a separate lawsuit. This type begins when the bank files an action asking the court for an order allowing a foreclosure sale.
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Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction, which prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily. Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. However, Texas law doesn't give borrowers a statutory right of redemption after a foreclosure. Once your Texas home has been foreclosed, you can't redeem it. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.
According to ATTOM, Texas had a foreclosure rate of 1 in every 6,887 housing units in early 2022, giving it the 23rd highest foreclosure rate in the U.S. Most of the foreclosures are in or near major metropolitan areas like Houston, Dallas, and San Antonio. Houston is actually among the cities with the most foreclosures in the nation. You can only submit offers through licensed agents registered in HUD’s system. Avoid end-of-month closings because closing agents are super busy at this time.
Two Foreclosure Procedures Available in Texas
In Texas, auctions are usually held on the first Tuesday of every month between 10 a.m. These sales usually require cash deposits right away and payment in full shortly after. If the loan default is not taken care of within twenty days after the lender issues a notice of default, this “cure period” ends, and the lender may list the home at a foreclosure sale.
In this article, you'll find details on foreclosure laws in Texas, with citations to statutes so you can learn more. Also, most Texas deeds of trust allow the lender (or the current loan holder, referred to as the "lender" in this article) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained.
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Buyer/tenants could forfeit all sums paid if they defaulted and be evicted as ordinary tenants. If the buyer/tenant has paid more than 40% of the amount due or made 48 or more monthly payments, then pursuant to the equity protection provisions of Prop. Code sec. 5.066, the seller/landlord must provide a 60 day notice of default and opportunity to cure the default. If the default is not cured, then a trustee may be appointed who can proceed with a non-judicial foreclosure. Texas law allows the borrower to block a nonjudicial foreclosure sale by “reinstating” the loan within 20 days after the bank serves the notice of default by mail.
Texas also has a relatively long redemption period for tax-delinquent foreclosures, which can last up to two years. During that time, prior owners can pay off their delinquent taxes to regain possession of their property, regardless of any improvements you may have made to it. The major benefit of buying a foreclosed home is the possibility of getting it for below market value.
If you intend to rent out the property, you must honor the terms of the lease for the current tenant. Texas is a moderately complex state when it comes to foreclosure law. It's mostly non-judicial, which means that most foreclosures don't need to be filed with the court or ruled on by a judge.
Clients often report that they were engaged in prolonged negotiations to modify their existing loan prior to the foreclosure sale. Of course, these communications were usually conducted by phone and there is no signed written agreement binding the lender to stop the sale, so there is likely no basis for a wrongful foreclosure suit. Do lenders pursue this strategy intentionally, so as to make it appear that they are willing to be reasonable, when in fact it is in their interest to foreclose instead? A causal connection can be shown between the defect and the grossly inadequate sales price. Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 253 (5th Cir. 2013), Sauceda v. GMAC Mortg.
In Bauder v. Alegria, 480 S.W.3d 92 (Tex.App.—Houston [14th Dist.] 2015, no pet.), the court found that text messages from the borrower were reasonable notice of the borrower’s change of address. In spite of this ruling, it would be reckless for any attorney or prudent investor to rely on text messaging for any such legally important purpose. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or should be formed by use of the site. The attorney listings on the site are paid attorney advertisements.
If you miss a payment, most loans include a grace period of ten or fifteen days, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. To find out the late charge amount and grace period for your loan, look at the promissory note you signed.
When mortgage-lending practices were more relaxed, many companies were providing borrowers with subprime mortgage loans. Companies lent to borrowers and were well aware they had bad credit and were extremely high-risk for defaulting on a mortgage loan. That said, foreclosures can result in below market sale prices and opportunities for sweat equity, so they can be worth it to patient buyers who wait for the right property to come along. Buyers looking for an affordable home that may need some work should consider buying a pre-foreclosure or REO in Texas. We recommend avoiding buying foreclosures at an auction unless you're an experienced real estate investor or flipper.
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