What Happens After a Foreclosure Sale?
A foreclosure sale either occurs at the conclusion of the auction of the property or when the property is resold on the market by the lender. Just because a home is foreclosed on that doesn't always extinguish the rights or responsibilities of its previous owner, and there are some things that can be applied after the foreclosure sale is completed.
Other People Are Reading
-
Being Sold to the Highest Bidder
-
At a foreclosure auction, the home is up for grabs by the first person, investor or the current owner. Whomever offers the bank the either minimum amount they will accept for the property, or higher, will be the one who is granted ownership. Often, this is equal to the defaulted loan amount, but the bank is able to set any minimum value they feel is adequate for the collateral.
If the property is sold to an investor or independent buyer, the deed and rights to the property are transferred to the new owner upon closing. If the buyer is using any type of financing, the closing process can take anywhere from 30 to 60 days. If the new buyer is able to secure the property using available funds, closing can take place in as little as 10 days.
Once funding is complete, the new owner is able to take possession of the property. If the current residents have not vacated the home, they can begin eviction proceedings immediately, or choose to lease the property to them for a specified amount of time.
If the current property owner is the highest bidder at the auction and comes up with the defaulted loan amount, they retain all rights to the property and will own it free and clear.
The House Being Kept By the Bank
-
If a high bidder is not found at the auction, the bank will retain rights to the property. The property then becomes a REO (Real Estate Owned) property. If the property was backed by a government secured loan such as FHA or VA financing, the property defaults into that entity's possession for resale.
The objective of an REO property for a bank or government institution is to be able to sell the home and recoup their losses for having to repossess the collateral, or to recoup the amount that they had to pay to the bank as the insurer of the note.
If the bank discovers that the property is still inhabited after the foreclosure sale, they have an option to evict or to rent the property to the current resident until such time as it can be resold on the open market.
-
Eviction
-
After the possession rights have been transferred to the new owner or retained by the bank, the new owner has the right to evict the current residents if they have not already vacated.
To do so, the new owner must file a request to evict with the county courts in the county where the property is located. Once approved, the county sheriff's office provides a notice to the resident that they are to vacate within 72 hours of the posting. Should the current owner refuse to vacate, the sheriff's office can evict them using all methods allowed under the law.
Renting Out the Property
-
Whether the ownership is kept by the bank or transferred to a new owner after a foreclosure sale, the new owner is given the option of renting the property back to the resident for whatever amount of time both parties can agree upon in lieu of eviction.
When this occurs, the new owner becomes the landlord and must sign a rental agreement with the resident for it to be legally binding and enforceable.
Listing the Property for Sale
-
When the property is purchased from an investor or kept by the bank, the primary goal is to resell it. Once the property is vacant, the bank or investor will evaluate repairs that need to be done to resell the property. Once this has been completed, the investor or bank will sign an agreement with a real estate broker to resell the property for whatever price can be agreed upon to allow for a quick sale.
Judgments
-
After a foreclosure property is sold as an REO, the bank will match up the sale against the defaulted loan amount. If there is a shortage between the sale price and the defaulted loan amount, the bank has the option of filing a judgment against the previous owner. The judgment will remain on a credit report for a period of 10 years and can inhibit the individual from obtaining new credit or making major financing purchases until it is paid in full.
-
References
- Photo Credit house sold garden image by Nicemonkey from Fotolia.com
