Foreclosure in 01845>Question Details

13spiders, Home Owner in 01845

If the bank is the buyer at the foreclosure auction at a price substantially lower than the mortgage, does that purchase price cap the amount the home

Asked by 13spiders, 01845 Tue Jun 14, 2011

If the bank is the buyer at a foreclosure at an amount substantially lower than the mortgage amount, the bank can go after the homeowner for that difference. Does the bank's purchase price set a limit as to how much the homeowner may owe? or would the homeowner also be on the hook if the bank sells the house at a lower price than that they purchased it at the foreclosure sale. ie - $100k mortgage, banks buys the house for $50k (the homeowner owes $50k) and then the bank sells the house for $25k. Could the homeowner be on the hook for $75k, or the bank's total loss?

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No. That is one of the big reasons to try a short sale. In a short sale, the borrower/seller has a little more control over what the home is sold for. They can reject offers that are too low. However, they risk the chance of not getting an offer, and the home going to foreclosure, if they try to get an offer above fair market value. It is always wise to start at fair market value and then reduce the price every other week or so, until an offer is received. That way the seller knows they did everything they could to mitigate the loss and the amount of the deficiency. Once the bank owns it, they can sell it for whatever they want. They may list it well below fair market value, just to get if off their books, and there is nothing the foreclosed upon homeowner can do about it. If you live in a state that allows deficiency judgments after foreclosure, you could be on the hook for whatever that loss is.
0 votes Thank Flag Link Tue Jun 14, 2011
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