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What You Should Know About Mortgage Foreclosure Excess Proceeds

After a borrower fails to make mortgage payments, the lender will probably foreclose. Many foreclosures terminate in an auction where the home is sold to a different owner. During the foreclosure predicaments, foreclosure sales often result in a deficiency, meaning the property is sold at less than the borrower is indebted. However, now that the real estate marketplace has mostly recovered, foreclosure sales frequently bring in more funds than the borrower owes. Read more here for more info on foreclosures.

How do foreclosure sales work? Depending on the country’s law and the circumstances, a foreclosure can be non-judicial or judicial. At the end of this process, an officer of the court of a trustee will typically perform the foreclosure sale. In the past, these sales nearly always entailed an auctioneer selling the home from the court of law steps or other public areas. Nowadays, the auction can be done online or in person. Online foreclosures are gaining fame day after day. At the foreclosure, the highest bidder could be a third party or the foreclosing lender. In case the lender gives a credit proposal and nobody else makes bids for a higher amount, the lender acquires the property. In case a third party bids a higher amount, the entity or person should pay for the property via cash, cashier’s check, or money in order, to become the owner of the home. Foreclosure homes usually sell for a rate that exceeds what the borrower owes the foreclosing lender. The money by which the acquisition price exceeds the loan amount is referred to as excess proceeds.

Will you get money back following a foreclosure sale? In case a foreclosure sale has excess proceeds, then the lender does not keep that amount. He or she is entitled to a figure that is enough to pay off the remaining loan balance and the expenses that come with the foreclosure and sale. Generally, the foreclosure borrower has the right to the additional cash but if any minor liens were on the property such as a second mortgage, or if the creditor documented a judgment lien against the home, those parties obtain the first shares of the money. After that, any proceeds remaining after these liens are paid off belong to the earlier owner.

How do you find out whether there are excess proceeds? Generally, if excess proceeds are available, the trustee or other sale representative has to convey notice to the known address of the foreclosed homeowner. However, the last known address is often the foreclosed home. Most people do not know they are due any excess proceeds hence vacating the foreclosed home without leaving behind their new address. It becomes hard for a sales representative to locate the foreclosed home possessors after a sale. Since a sale could have excess proceeds, you should thus track proceeds. Note down the sale date; it’s included in the foreclosure papers you get. After the auction, call the trustee or officer who sold your home and ask if there are excess proceeds.

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