question about foreclorsure

[mom-from-missouri]

I had someone ask me, and I dont know. If someone has something forclosed, and it sells for say $400000 but they only owed $100000, does the bank keep the difference or the person who lost the property. I guessed the bank, but does anyone know???

[JoshuaHeckathorn]

If the borrower still owes $100K and the property sells for $40K, then there isn't any difference for any party to keep. Since the sale won't satisfy the amount of the loan, the bank can then get a deficiency judgment against the borrower for the difference - $60K. Am I understanding your question correctly?

[mom-from-missouri]

That should be $400.000

[creditcardfree]

Well, I think some of the equity could come back to the person. The bank would want all the back payments and fees for selling the property, ect. I don't think they legally could keep more than that. The bank isn't out to foreclose on people to make a profit, they just want the money they are legally owed.

Of course, I'm just guessing here, too!

[PrincessPerky]

Yeah but if you wanted to sell for a profit and not be foreclosed I think you ought to have done that before the bank had to.

I highly doubt on the one or two houses the bank makes money on they share it back with the original borrower.

Remember if you are being foreclosed it is not on a house you own, it is on a house you borrowed money to pay off, that the BANK owns.

Though we do live in America, so who knows.

[creditcardfree]

Yeah but if you wanted to sell for a profit and not be foreclosed I think you ought to have done that before the bank had to.

I highly doubt on the one or two houses the bank makes money on they share it back with the original borrower.

Remember if you are being foreclosed it is not on a house you own, it is on a house you borrowed money to pay off, that the BANK owns.

Though we do live in America, so who knows.

I agree if your house has that much equity you should be selling before waiting for foreclosure. But is not the equity the portion of the house that you do own? I'd like to think I'm a part owner with the bank. I understand the contractual obligations, of course.

[creditcardfree]

It may vary by state but here is a document from Florida indicated that once other lienholders have been satisfied the proceeds are legally the homeowner's.

[maat55]

I have searched this before and have twice found that you loose your equity in an foreclosure.


With foreclosures for sale at a record high, individuals need to be aware of the consequences of these foreclosures. Foreclosures can affect an individual’s or family’s future financially. Foreclosures can also cause serious emotional and financial damage that can last for quite some time. First, there is a loss of equity. A homeowner in foreclosure who is not able to reinstate their loan has two options. They have the option of selling the property to a foreclosure investor cheaply. If this happens, the majority of the equity is lost.



The other option is losing the home to a foreclosure sale. The owner will get no equity in this situation as well. Credit problems are another consequence of foreclosure. If a home goes into foreclosure, that can cause a lot of damage to a homeowners credit rating. The foreclosure is recorded and will stay on the individual’s credit report for several years. If a person has a bad credit rating than this will make any future lending nearly impossible to get. The price of any borrowing that is done in the future will be high because lenders will charge high interest rates. Many years of expensive and limited credit is a consequence of foreclosure over the long term. This means that the complete cost of foreclosure is high and recovering financially very hard. A foreclosure will cause the title of a property to be transferred and a tax assessment will occur. If a homeowner has equity loans against the appreciation of the property and the loans are not repaid, it is considered profit taking.

These types of loans can be taxed and the homeowner has to deal with any taxes that can be due on the profit. The majority of property owners don’t realize that they can cause a tax assessment when the home is lost in a foreclosure. Often when a property is a foreclosed home on the security on a junior lien lender is canceled. However, when that security is lost, lenders can force collection action through the court system. Debt collection of this type causes serious financial problems. If an individual files bankruptcy as a result of a foreclosure, there are consequences for this as well. Bankruptcy is typically the last resort for homeowners. Bankruptcy means the homeowner has used up all other means to try to find a solution but none of them have worked.

It is important to know the types of foreclosure that can be filed and the consequences of each. A homeowner can file a Chapter 7 or Chapter 13. A Chapter 7 filing calls for the debtor to give up all property that is non-exempt to benefit creditors. When this occurs, all debt is discharged. However, car loans, taxes, and home mortgages have to be paid back in full.

A person can still lose their home and any equity they have build up in it if the mortgage payments have not been paid. Chapter 7 relieves the individual of medical debt, credit card debt, and unsecured debt but major debts still have to be paid. When a Chapter 13 is filed, the person who is in debt attempts to repay most of their debt over a certain time period. They are supervised by a court appointed trustee. If a payment plan is approved and payments are kept up, the individual gets to keep their property and are released from a portion of debts they could not pay.

It is important to remember that there are laws now in place that make it harder to pursue this course of action to avoid foreclosure.



Read more: Consequences of Foreclosure | News and Articles About Real Estate and Foreclosures - Foreclosure DataOnline

[coach2wealth]

This makes no sense. Why is someone letting a property go into foreclosure if it's worth 4 times the debt? Worst case, you can dump the property to a real estate investor in just days for much more then the debt. There must be other leans or debts secured by this property.

[David Pratt]

Yes, in foreclosure the bank takes the asset for being default in making payments, regardless of the amount owed. I agree with Coach2Wealth that this doesn't make a lot of sense, given the equity in the property.

[Kimber6]

If the bank forecloses you get NO proceeds no matter what they sell for.