Are You Going To Get a Deficiency Judgement If you Can’t Avoid Foreclosure?

By MyVine | November 4, 2011

In the event you own additional than one home and are facing foreclosure, that you are most likely worried concerning the bank going immediately after your second house if you’re unable to save the very first. Bank representatives and armchair foreclosure authorities will threaten you with being sued once more and losing your other house, having your other assets repossessed, and perhaps even having your bank or retirement accounts stolen or wages garnished. Fortunately, on the other hand, many of these predictions will in no way turn into reality.

The concern of foreclosure does need to be taken seriously, though, and finding out your selections need to be the first consideration. The very first factor you need to do is consider several other solutions as opposed to just letting a residence go through the foreclosure procedure. Attempt and get as much time as you may from the bank, even if a sheriff sale is coming up; the bank can postpone any foreclosure proceedings in the local courts or cancel an auction to provide you with far more time to work on a remedy.

You might desire to take into account attempting to list your residence for sale, even if you have to do it with a short sale and convince the bank to take much less than the total amount you owe on the loan. Otherwise, if there is truly no approach to save the property along with the lender is unwilling to do a brief sale, it is possible to provide the bank a deed in lieu of foreclosure, which will, upon the bank’s acceptance of the offer, stop foreclosure and permit you to give the residence back to the bank rather than going through the entire legal process and seeing your residence auctioned off by the county.

But if the residence does go into foreclosure and you do lose it to a sheriff sale, this does not mean the bank can go immediately after your other residence or any other assets you nonetheless possess. Quite a few unique specifications should be met for a bank to try and sue you once again soon after the foreclosure. Most of these specifications are simple to meet, but the last one usually guarantees that the bank won’t take the time to pursue an additional lawsuit to go immediately after your other individual items or additional houses.

First, the home has to sell at the county auction for less than the total amount owed on the loan in the time of the sheriff sale. This is usually fairly simple to meet, since the bank will have added thousands of dollars in fees so that nobody in their appropriate mind (not even the bank) would pay that much for the home. Typically, it really is the foreclosing bank that places the only bid on the property, and they bid the minimum amount, so the house is likely to sell for far much less than the total quantity owed. The bank will end up with the property and also a handy write-off for the lost portion of the debt.

Second, your state has to permit deficiency judgments inside the case of foreclosure. Not all states allow this in their foreclosure laws, so make sure you appear up your law and learn if they are able to sue you and under what circumstances. Even if the lender is allowed to pursue a different lawsuit, the kind of foreclosure utilized, no matter if judicial or nonjudicial, can also be a determining factor in how tough it’s going to be to start the lawsuit and how it should be pursued.

Lastly, you truly have to have something of value that the bank would want, commonly some highly liquid asset the bank can quickly seize. That does not mean having yet another house, to be clear. If the bank got absolutely nothing back from you on this foreclosure, what makes you believe it could be worth their time to go following your other residence? Would they get anything for their time and cash, or would they most most likely just get stuck with losing much more income when the house sells for too little at an auction to pay off even the existing mortgages, let alone a deficiency judgment?

So, perhaps the bank could go after your other residence soon after you lose one. But, in practical terms, banks virtually never do this, because it just is just not worth their time. It costs them additional to employ attorneys to sue you for the original foreclosure, then sue once again right after that for a deficiency judgment, then sue you once more for foreclosure on your other residence due to nonpayment of the deficiency judgment. And inside the finish, they will almost certainly still wind up with nothing to compensate them for their total costs.

Topics: Buying Tips, Financing, Foreclosures, General, Investing, Selling Tips | Comments Off

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