An individual’s failure to pay his mortgage payments will result in the lender reclaiming his property through foreclosure. Initially, all banks attempt to sell foreclosed homes at auction. If a home does not sell, the bank’s attorney purchases the home for the bank.
When a bank reclaims a home after the foreclosure auction, it must prepare the property for sale through a realty company. First, the bank evicts the former homeowners if they haven’t already vacated the premises. A bank may also repair any obvious damage done to the home and change the locks.
After an unsuccessful foreclosure auction, the bank will hire a real estate agent and sell the home on the open market. Until the property sells, the bank is responsible for the home’s upkeep – including paying property taxes on the home. Thus, banks are eager to sell and savvy buyers can often purchase foreclosures for less than fair market value.
After the property sells to a buyer, the bank will apply the purchase price to the previous homeowner’s outstanding loan balance. If the sale price of the home does not cover the mortgage debt, and the practice is legal in the state where the property is located, the bank may sue the former homeowner for any balance that remains on the loan.
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