Groundfloor begins to incur costs as soon as the loan defaults, and these costs continue to grow as long as the loan is delinquent, in foreclosure, or in the real estate owned (REO) sales process. Please note that foreclosure and legal costs are never passed onto our investors, but may impact your return on investment.
Foreclosure and legal costs consist of the following:
- Tax and insurance payments: Groundfloor may need to pay taxes and insurance in order to protect the collateral.
- Maintaining the property: If the borrower is not properly maintaining the property, Groundfloor is responsible for maintenance costs. These costs may include; lawn upkeep, securing the property (changing the locks, boarding windows, etc.), complying with safety codes, winterizing the property, and homeowners association or condominium fees, if applicable.
- Collection efforts and special loan servicing: Servicing delinquent loans requires additional resources and staffing.
- Legal costs: Groundfloor incurs legal expenses in all jurisdictions, which are more costly in judicial foreclosure states. Some of these costs include; attorney and document preparation fees.
- Groundfloor travel fees: In many instances, a Groundfloor representative will need to travel to visit the property, or appear at foreclosure hearings.
- Administrative fees: There are several administrative fees associated with a foreclosure. Some examples are; court fees, foreclosure publication notices, auctioneer fees, title fees, local Sheriff sale fees (if a Sheriff conducts the foreclosure auction), etc.
If Groundfloor takes possession of the property and title via the foreclosure sale, we then have to prepare and market the property for sale. The main expenses associated with this phase of foreclosure consists of the following:
- Costs of restoring the property
- Marketing and costs of listing the property
- Real estate commissions