“We’re going to lose our home to foreclosure. We owe too much to sell and the bank denied our short sale. I lost my job and my wife isn’t able to work, so we can’t make the payment and definitely are going to lose our home. I hate the feeling of not knowing what’s going to happen to me and my family. Can you tell me what to expect?”
Answer:
(As this involves legal issues, please consult your attorney.)
I’m very sorry to hear about your situation. Let me give you a preview of what you can expect:
—Notice of Default—
Foreclosure officially begins when your bank files a “Notice of Default,” which is public record.
—Minimum Three Month Waiting Period—
Once that Notice is filed, you’ll become very popular with letters, phone calls, and maybe even personal visits from:
- Your lender… asking you for payments and perhaps proposing ways to keep you in the home.
- Investors… trying to “steal” your home.
- Agents… trying to sell your home.
- Lenders… trying to loan you money (if you have equity) and also possibly trying to “steal” your home.
- Attorneys… trying to get you to declare bankruptcy (which may or may not be beneficial to you, but probably not based on what you told me).
Some agents, lenders, and attorneys may legitimately be trying to help you AND make a buck in the process. But many will just be trying to take advantage of you.
—Notice of Sale—
A minimum of three months after the Notice of Default is filed, the bank will file a Notice of Sale.
—Minimum 21-Day Waiting Period—
More calls, letters, visits.
—Foreclosure Sale—
Your home will be sold at a foreclosure auction, aka “trustee sale.” Since you said your payoff (loan balance + arrearages + fees + penalties) exceeds your home’s value, no investor will buy it at the auction, so your home will go back to the bank.
—Move Out—
Your bank will hire a real estate agent to see if you’re still in the home. If so, the agent will offer you a little “relocation assistance” money. If you don’t agree to move, you’ll be evicted and forcibly removed by the sheriff.
—Ramifications—
- You will almost certainly owe nothing to the bank (verify with your attorney).
- The amount the bank loses (aka “cancelled debt”) may be designated as taxable income by the IRS, so you may get a 1099 and have taxes due.
- The foreclosure will show on your credit for seven years, making obtaining credit more difficult and expensive.
