Life after foreclosure

The foreclosure auction was this morning. A third party was the high bidder. What happens next?

In a typical transaction, the buyer gets 30 days to finalize the deal. At that closing, the lender delivers a foreclosure deed to the buyer who then becomes the owner of the property.

Through all this time and beyond, the original homeowner-borrower is able to remain in the house. Technically, it takes an eviction order from a court to force the holdover owner out of the property.

Besides finding a new residence, the old homeowner is also likely to become a defendant in a deficiency lawsuit. In this proceeding, the lender seeks to recover the difference between the total owed on the mortgage and the amount realized at the auction. For example, if the balance owed on the mortgage was $350,000 but the winning bid at the auction was only $300,000, the borrower would still owe the lender $50,000. In some cases, these deficiencies might be written off immediately, but more likely, the lender will use the appropriate judicial process to scrutinize the borrower’s remaining assets and ability to pay on the judgment into the future.