What Happens to the Homeowner in a Foreclosure Auction?

Going through the auction of a home is a sad reality for many people.

Homeowners facing foreclosure and auction are in serious jeopardy of losing their homes. To get to the point where foreclosure is occurring generally means that the homeowner is at least 90 days past due on his mortgage, which can mean thousands of dollars are owed to the mortgage company. To avoid losing their homes at auction, homeowners must either raise the funds to pay the past due amount or try to sell the home before the auction takes place.

Foreclosure Defined

When a property owner is behind on her mortgage payments, the bank or finance company that owns the mortgage can repossess the property or order it sold because the past due payments have put the mortgage in default. The legal process of taking the property back after a defaulted loan is called foreclosure. To be granted a foreclosure and have the property either returned or sold, the mortgage company has to initiate the applicable state laws and procedure to have the home returned to them or sold at auction. When this process is complete, the current homeowner becomes a tenant in the home and could face eviction by the new owners.

Auctions Defined

An auction, also referred to as a sheriff's sale, is the process of selling a home that has been foreclosed upon. The sale usually takes place on the steps of the county courthouse, though in some states, the auctions are held at the site of the property. Auctions are published in the legal section of the paper as required by law. For homeowners who find their homes up for auction, this generally means that their time in the home is coming to an end and finding alternate housing is of utmost importance.

After the Auction

Once the house has been sold at auction and the sale has been confirmed, the new homeowners can proceed with their plans. If the former homeowners are still occupying the home, the new homeowners can have them evicted. The former owners will be given from several days to several weeks to move out. If they do not comply, the new owners can file for eviction and request that the sheriff carry out a set-out, the forcible removal of the occupants and their possessions.

Time Frame

The foreclosure to auction time frame varies by state. In some states, such as Ohio, the process takes a few weeks to two months, whereas in California, foreclosures and auctions can take several months. Whatever the time frame, the owners who are in jeopardy of losing their home need to either prepare to move out or try to generate the funds to save their home. In most cases, payment from the owners of all overdue mortgage payments will be accepted up until the auction takes place. After the auction, however, the only recourse the former owner will have will be to buy the home back from the new owners.

Alternatives

To avoid auction, homeowners can try to short sale the home. A short sale is an agreement between the homeowner and mortgage company that allows the homeowner to sell the home for less than is actually owed. In return, the mortgage company agrees not to hold the old homeowner responsible for the loss of the sale.

Many mortgage companies will agree to a short sale because the loss of profit on the sale is often less than the costs to foreclose and sell a home at auction. It can be a relief for the homeowners as well since they can avoid the negative impact a foreclosure will have on their credit rating and it allows them to attain financing for a new home. Homeowners can also file for bankruptcy in an attempt to save their homes, but this approach may only delay the process.

References

• Debt Workout: Foreclosure FAQ