Foreclosure in Louisville>Question Details

Jaallc, Home Buyer in Louisville, KY

If a bank buys back a property at foreclosure sale for more then amount to be raised is the owner still responsible for any deficiency

Asked by Jaallc, Louisville, KY Thu Jul 8, 2010

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what is the process and time frame when a bank acquire property at a foreclosure sale in memphis tenn
0 votes Thank Flag Link Thu Oct 24, 2013
There are seperate things to consider, if the bank purchase the home back at auction, it is because there was not any bids by people at the auction to meet the banks minimum. Normally the minimum is 80% if what that owner owed. Say you owed 200,000 the bank can then buy it back from 160k to 200k depending on state laws regarding foreclosure.

That amount is not what the bank bases deficiency on, the bank then has to sell it, they will clear the deed, clean the property, have to maintain it and pay for utilities. If they end up selling it 140,000 the deficiency will be the 200k the owner owed, less the 140k they sold it for plus the costs of foreclosure

the bank will quickly assess if you own anything else they can attach or if you have the ability to pay. if so they will try and collect, if not they can write it off or sell it to a collector at 10cents to 50 cents on teh dollar and teh collector will haunt you for 3 years or what the law allows.
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0 votes Thank Flag Link Mon Jul 19, 2010
There is most likely a misunderstanding somewhere in here. Is it possible that the previous owner is confusing the "Amount to be raised" with their last known balance? The bank would have no reason to bid against someone who was willing to buy them out of the whole mess.

Short answer: Even if they did, the previous owner would still be responsible for the charge off balance, court costs, attorney fees, interest, city citations (if applicable) and any other leins or judgments that there may be against the property. The foreclosure wipes out the collateral but not the actual debt.
0 votes Thank Flag Link Mon Jul 19, 2010
If there is a deficiency it could be possible the former owner still owes the bank. The amount to be raised is determined by a judge, not the bank; however the judge will usually find based on the amounts proven to be owed by the lien holders that join in the foreclosure proceedings, plus costs, etc.

Kentucky is not a Deed of Trust State so banks must purchase the property at the commissioner’s sale if they are trying to protect their lien interest, however I have never seen one pay more than the amount they are owed plus accrued interest and costs. It may be possible, but what a PR nightmare for a bank in the current housing market!!!

Each lender has their own policy, I know one that let the property go at the commissioner’s sale regardless of price. There is nothing that requires a lender to bid at all.

The question back to you Jaalic, how would there be a deficiency if the price paid for the home exceeds the amount to be raised? Are there additional liens that did not join in the foreclosure process? That is the only circumstance I can come up with that would create such a problem. A foreclosure does not necessarily eliminate the liabilities. Only payment, forgiveness, bankruptcy or death without leaving an estate can do that.
0 votes Thank Flag Link Fri Jul 9, 2010
Banks don't buy back homes in a foreclosure. The bank puts the house up for sale by auction and usually has a minimum bid required. If no one bids the minimum then the bank gets the house automatically. They then will put the house on the market as an REO listing. (Bank owned). If they get more for the property then what is owed, then there isn't any deficiency.

Keep in mind however that Kentucky is a recourse state. This means that the bank can come after you for any deficiency at a later date. You could be responsible for any fees or costs the bank needs to recoupe as well as any unpaid real estate taxes that may be due.
0 votes Thank Flag Link Thu Jul 8, 2010
There is no deficiency if the auction nets more than required. The funds in excess should be sent to the homeowner. I can't say that this would happen very often.
0 votes Thank Flag Link Thu Jul 8, 2010
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