What Happens After Foreclosure? Four Possible outcomes…

foreclosure5What happens after foreclosure? Most of us know that foreclosure is the process through which a lender takes legal ownership of a home to recover the cost of an unpaid mortgage. It’s an ugly situation that no homeowner wants to find himself in, but that’s becoming more and more common as the nation’s housing crisis deepens. In fact, hundreds of thousands of foreclosures are filed by lenders each month, and that number is growing. Most people try to stop the loss of their home to the bank, either by working out a payment arrangement or selling the property. Very few really know what happens if the foreclosure goes through. For homeowners facing this prospect, this is very important information.

When a foreclosure runs to its conclusion, one of four things usually happens:

*The homeowner pays off the mortgage, usually through a refinance, but sometimes through cash. Once the mortgage note is paid off, the foreclosure becomes null and void. The homeowner can pay off the mortgage at any point during the proceedings, right up until the time the bank takes possession of the property.

*The homeowner sells the property for the full amount of what’s owed on the mortgage. Again, this pays off the loan and stops the bank from taking possession. The house can be sold by the homeowner at any point, right up until the foreclosure auction.

*The home is sold at a public auction. Depending on the state, this auction may be held on the courthouse steps, at the home, or elsewhere. The highest bidder gets the deed to the property, and is usually required to pay cash.

*The bank takes possession of the property.  This usually happens when there are no bidders on the property at the auction, or no one bids high enough to satisfy the lender. Banks can also take possession of the property through a deed in lieu of foreclosure arrangement with the homeowner (the homeowner gives the deed to the lender on a voluntary basis). Once the bank owns the property, it becomes known as a REO (Real Estate Owned by lender), and the lender is responsible for its upkeep and maintenance. As can be imagined, lenders typically try to sell REO properties as soon as possible, as these are a great expense to them.

After the foreclosure has been completed, there may be a redemption period in which the homeowner can still reclaim the home. Not every state has a redemption period, so be sure to check your own state laws if you’re facing foreclosure. Redemption periods can last from a few days to a month or more, and you can not be evicted from your home during this time, even if the home has been sold at auction. If you’re able to come up with the money to pay off the mortgage during the redemption period, you get to keep ownership of your home. If your state has no redemption period, then you’ll likely have to leave the house as soon as the foreclosure sale is complete. It’s important to know what happens after foreclosure, so you can be sure your interests are protected and your full rights are exercised during the entire process.

This is the sixth installment in our foreclosure series. Be sure to check back for updates…

18 thoughts on “What Happens After Foreclosure? Four Possible outcomes…”

  1. Question: when the house is on a foreclosure (because the homeowner cannot afford the elevated monthly mortgage, nor either sell the house because its deep under water valued) and then went through the process of auction by the lender and the auction value for the house is way off ( too low) compared to the previous loan and mortgage balance prior to foreclosure. Can thesame homeowner bid and be awarded in the auction for thesame property if he gets the auction award?

  2. I want to purchase a foreclosure home but i am in the process of buying another right now. how much of a chance so i have to sell the one i have and get the one i want? its going up for foreclosure next week and if nobody bids then it goes to a bank. how long would i have to sell mine so i can purchase that one? i don;t know anything about real estate.

  3. If i hold a second on a home that is forclosed upon and the bank who holds the first forcloses for way above the first owed , is there a legal way of having the court award some of that profit the bank made to repay me ?

  4. This is such a great resource that you are providing and you give it away for free. I enjoy seeing websites that understand the value of providing a prime resource for free. I truly loved reading your post. Thanks!

  5. I have a friend who lost his home in foreclosure, and then lost the UD case, and has now been evicted by the bank/landlord. It’s kind of complicated but his name wasn’t the named defendant on the UD complaint– a tenant of his was so on his behalf I filed a motion to intervene so he can be named in the UD complaint. The hope is that I can help him get in the loop—eventhough it’s obviously late in the game– and file an objeciton to the UD and a request a stay on any further litigation until after the federal action is resolved.
    He has filed a federal court action (mortgagfe fraud) where the UD Plaintiff is the defendant. A hearing on Defendant’s motion to dismiss and to expunge the lis pendens in this action is set in October.
    I know this is convoluted but do you think filing a motion to intervene is even a practicel course of action at this point in time and can the bank still auction off the property before the October hearing?.

  6. What happens if a house is auctioned below the value of the loan amount. Is the owner responsible for the remaining balance?

  7. if one goes through foreclosure, can bank come after your other rental real estate properties (not under same mortgage) and other assets that you have, example: IRA,stocks, savings, autos, garnish your wage, etc.?

  8. my house is going to sheriff sell at the end of this month; how long do i have to leave the house do they notify me about the auction and period of time to leave the house

  9. Is for closure and giving your house back to the bank is the same thing?
    So if its taken or you gave it away-can they still come after you savings?Do they have that right?And how long do that lasts?Can they just pull up your social and take everything you have?

  10. What is the difference in deed in liu of trust thing over a forcloser! What are the legal issues involved in a forcloser? Which is the better way to go to get out from under it?

  11. I have lost my home to forclosure. And I am staying in a friends basement at this time. What is My next step? What should I do? I do not own a charge card or any other credit. I will not be able to stay in my friends basement for long! How long before I can attempt to by another house? I was really thinking about renting with option to buy, Is this a good idea? What is my next step that I should be doing right now?

  12. My house already went at auction, I know someone asked about being responsible for the difference, could someone elaborate on that? I dont own stock and I would prefer if they don’t garnish my wages without my say so. Someone told me i’m in a position where I can file bankrupsy but i really dont want to resort to that. I get by with my bills, i’m just afraid of what could happen when the bank comes to me for the balance… and how would it work b/c my ex’s name is also on the house. I’m just really confused and lost, and was wondering if I had any other options…

  13. What happens if a house is auctioned below the value of the loan amount. Is the owner responsible for the remaining balance? If one goes through foreclosure, can bank come after your other rental real estate properties (not under same mortgage) and other assets that you have, example: IRA,stocks, savings, autos, garnish your wage, etc.?
    Can they just pull up your social and take everything you have?

  14. My wife and I lost our jobs four years ago. We used to make @$95,000 but now we make less than $45,000. We can not afford our house anymore and the value of our house in our neighborhood has dropped to $110,000 from $233,000. We can not sell the house and we can no longer afford the $1,400.00 house payment. We tried to modification with our mortgageholder but they kept playing games by saying that they needed and didn’t get paperwork. We played this game for ten months now and now we have decided to give the house up. We tried selling it but no luck. What backlash can we expect?

  15. If the bank is the only bidder and buys the house at a foreclosure sale at a price substantially lower than the mortgage amount, does that price cap the homeowners liability? Say the bank eventually sells the house lower than it purchases the house at the foreclosure auction, would that also be the homeowner’s responsibility? Say the mortgage was $100k, the house sells to the bank at the foreclosure sale for $50k and the bank eventually sells the house for $25k (not counting expenses). Is the homeowner on the hook for $50k or $75k? What about he bank’s expenses?

  16. Terry,
    You need to try harder with the bank to get the Mod. I work at a place doing Mods. Yes it can be a pain to work with the banks, but get them what they ask for. If they didn’t get it, send it again. And 20 times if they ask. It’s your house we’re talking about.

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