What Happens If a House Goes Back to the Bank for Foreclosure?
Foreclosure happens when homeowners are unable to make several monthly payments on a mortgage. In foreclosure, the bank or another type of mortgage lender regains possession of the home in order to sell it to attempt to make some of the money back. Foreclosure is avoidable, but due to the economic downturn of the late 2000s, some people are living in and paying for homes that are worth less than they owe, so they simply walk away from the mortgage and let the bank have the house back.
Other People Are Reading
-
Credit Score Impact
-
A homeowner's credit score will be negatively affected if foreclosure happens. Missed or late payments add up, and each one is a negative mark on the person's credit score. It might take two or more years to rebuild a credit score before the homeowner can qualify for another home loan after foreclosure.Credit scores will be reduced 100 to 200 points, and the foreclosure will stay on the person's credit report for seven years. If this happens to you, you will have to explain to lenders or creditors what happened every time you apply for a credit card or other loan. You also might find yourself paying higher interest rates on existing debts or seeing your credit limits reduced following foreclosure.
Bank Sells the Home
-
When a home goes through foreclosure and is repossessed by a bank (assuming it doesn't sell to an investor at a foreclosure auction), the bank tries to sell it, often as fast as possible. Banks are not in the business of buying and selling homes, so they have an incentive to unload the properties, but not as big an incentive as some people think. Investors can get decent deals on REOs, but rarely the screaming deals some expect.
-
Property and Personal Items
-
During the foreclosure process, you have time to move your personal property out of the house. Once the foreclosure is final, the remaining items in a house become the property of the bank. At that point, banks often hire cleanup crews to clear and clean out the house. This process is called a "trash out." If you are going through foreclosure, be sure to remove any items of value before it is finalized; otherwise, you will lose those items.
Tax Bill
-
Oftentimes after a foreclosure happens and the house is sold, the previous owner of the home will be sued by the bank for the difference between what the home sold for and what the mortgage balance was. The owner may also face a tax bill for the difference.
-
References
- Photo Credit House For Sale image by TMLP from Fotolia.com
