If My Home Was Sold for Less After a Foreclosure, Do I Owe That Money Back?
Just because your house is sold at foreclosure doesn't mean someone will be paying what the house is worth. Find out if you owe money to a lender after your house is sold at foreclosure for less than you owe with help from a licensed California real estate broker in this free video clip.
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If my home was sold for less after a foreclosure, do I owe that money back? Hello, I'm Jack McLaughlin, licensed broker and president of My Broker Donates. Today we're going to talk about deficiency. If your home was sold for less after a foreclosure, do you owe that money back to the lender? And as always, I want you to remember the first rule of real estate. No surprises. I assume you mean the property was foreclosed on and eventually sold for less than the lender was owed. Could the mortgage company come after you for the difference? Deficiency could mean collection action and potentially a lawsuit and judgement resulting in garnishment of your wages, leans on your future property, or levees of your bank account. And for many borrowers, liability for deficiency may mean the difference between declaring bankruptcy or not, so it's very serious. It depends on a couple of things. Where the house is located, and the terms of your mortgage. For example, California like many enlightened states has a very strong law protecting home owners from deficiency judgements following a foreclosure. This is called the anti deficiency statute or the non recourse statute. It says, in essence, that borrowers who take purchase money loans, all of the money taken out by the loan was used to purchase the house, some still qualified as purchase money but many do not. Heelocks and many others do not qualify. A loan on an owner occupied residence of not more than four units are not liable to the lender for deficiencies after a non judicial judgement. Non recourse, what does it mean? If your loan is non recourse, it means that upon foreclosure, the only thing that the home lender can recover from you is the property itself. The loan will be considered satisfied by the foreclosure sale regardless of the price that the home sells for. The lender cannot sue you for the amount that you are upside down on the house or take other collection actions against you. In the end, you may be liable for taxes on the amount forgiven and the lender will send you a form 10-99. I'm a real estate broker, I'm not an attorney, and I'm not qualified to give you legal advice. You should seek the advice of a professional attorney. Regulations may vary substantially between communities. Ask a local Realtor if you have questions. If you like, we can connect you with one free of charge. Thanks for tuning in and remember, have fun with real estate.