Real Estate Foreclosures, Short Sales & Auctions in Oregon

Instructor: Marc Willcuts

Marc Willcuts has been an active Realtor since 2014 and has a passion for helping others learn the profession.

All states have laws that regulate lender actions in relation to real estate. In this lesson, you'll learn about the laws that regulate foreclosures, short sales, and real estate auctions in the state of Oregon.

Non-Payment of Debt

Things do not always go according to plan after purchasing a home. Job loss, illness, a death in the family, and other unforeseen circumstances sometimes lead to a borrower becoming delinquent on their mortgage. When this happens, lenders take several steps to resolve the issue, and if necessary, recover their money through one or more of the following methods:

  • Short sales
  • Foreclosures
  • Foreclosure sales and auctions

Short Sales

If a borrower is delinquent on their loan and owes more than the property that is tied to the loan is worth, they are said to be underwater. In these cases, the lender may suggest or agree to a short sale. This means that the home would be sold for what the home is worth, rather than what the borrower owes. For example, if a borrower owes $120,000 on a home loan, but the home is only worth $100,000, the lender may allow the home to be sold to a new buyer for $100,000.

In cases such as these, the lender has determined that they may lose less money through a short sale than they would if they foreclosed on the home and sold it themselves. Short sales are listed by a real estate agent, but a short sale negotiator acts as the seller. Because of this, the process can be incredibly slow. This is why, people in the real estate industry often say 'short sales are anything but short.'

The short sale negotiator essentially acts as a middle man between the agent and the lender. The offer price has to be approved by the lender. Lenders may have to approve other aspects of then transaction, such as an inspection period extension, price change, and closing date extension to name a few. Other than the involvement of the short sale negotiator, the transaction is identical to a normal real estate transaction.

Foreclosure

If the lender determines they can recover more of their money from a delinquent loan by selling the home themselves, they will foreclose on the property. This means that the lender is exercising their right to take the property away from the borrower and hold title themselves.

There are two types of foreclosure in Oregon. The type of foreclosure that is used typically depends on how the property is being used.

  • If the property is a primary residence, the lender uses a non-judicial foreclosure. In this process, the court system is not involved.
  • If the property is a second residence or an income producing property, the lender may use a judicial foreclosure. In this process, the court system is involved.

In the case of a non-judicial foreclosure, the lender issues a notice of default (NOD). After recording the NOD, the lender issues a notice of sale. Oregon statute 86.771 states that the notice of sale has to include information about the foreclosing entity, the amount the borrower owes, the foreclosure sale date, and the borrower's right to pay back the lender and reclaim their property within a certain time (in keeping with Oregon statute 86.778).

According to Oregon statute 86.797, there is no redemption period after the sale of a non-judicially foreclosed home. This means that once the sale has been made, it is final. The party being foreclosed on has no way of regaining title to the property.

In the case of a judicial foreclosure, the lender files a lawsuit in court against the borrower, which allows the lender to seek a court order to sell the property.

Foreclosure Sales and Auctions

There are a few ways that a lender can sell a property that they have foreclosed on. If the lender forecloses non-judicially, they typically just list the home on the market using a real estate agent like a normal sale.

If they foreclose judicially, the home is typically sold at a courthouse auction. There are a number of rules surrounding this type of sale. For example, according to Oregon statute 86.782, the designated time of the auction must be after 9 a.m. and before 4 p.m. Subsection 3 of Oregon statute 86.782, the trustee must execute the sale and deliver the property deed to the purchaser within 10 days following payment.

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