Question by love the journey: How does home foreclosure work?
If you fail to make your mortgage payments, can the bank garnish your wages for the payments?Or do they just take repossession of the home and auction it off themselves?And if they just auction it and can’t sell it for enough to cover the remaining mortgage amount, can they come back and sue you for that, even if you no longer have access to the home?I’m asking because I need to know…if a person decided to deliberately stop making payments on their home mortgage because the home will not sell on the market quick enough and they have to move out of state, what are the repurcussions?(Besides bad credit)The goal is to just get rid of the house, regardless of the loss in profit from the sale of it, and regardless of how it will effect the homeowner’s credit.Please provide any information pertaining to this.
Best answer:
Answer by Rex
They don’t garish wages for it duing foreclosure, although I would think they can after the fact.
They take possession and are presently simply selling most of them. They sell them short and while they can get hte rest of the money out of you they typically have not been. Altough typically people work with them, your idea is not typical and they very well may sue you for the rest of the money, plus all of the expenses. They would win, as you obviously did borrow their money and you obviously did not repay the money that you took.
You are better off contacting them and telling them that you want to default and try a “short sale”. If you are working with them they agree to take a loss for a specific amount and you sell the house for that. While it is not that great for your credit they will leave you alone.
Know better? Leave your own answer in the comments!
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Once your home goes into foreclosure the home will be set to be sold at a sheriff’s auction. Many times the lender will buy back their own homes so that they can sell it themselves and make back a little more of the money.
The bank will not garnish your wages while the home is in foreclosure. After the home is sold at auction, the lender can come after you for the shortage between what it sold for and what you owed. You will most definitely receive a 1099c for a cancellation of debt after the home is sold at auction. This will be in the amount of the difference between what the house sells for and what you owed on the home. This 1099c will be reported to the IRS and you will have to treat it as “normal” income for that tax year. For example if you owed 150,000 on the house and the lender ended up selling it for 110,000, you would be issued a 1099c in the amount of 40,000. You would claim this as income for that tax year and you would have to pay income taxes on this money (most likely federal, state and local which could result in a pretty hefty sum of taxes).
As one of the other posters mentioned your best option would probably be to explain what is going on to the lender and ask them about a short sale. This way your credit does not get totally ruined, you should be able to get more money for the house than the lender, you will not have a foreclosure showing on your credit, you will not be sued for the difference, and the if you still receive a 1099c it will be for less than if the lender has to sell the home themselves. Check out the links below for information on short sales and avoiding foreclosure.
If you are willing to walk away call the bank and ask them if they will except a deed in lieu of foreclosure. This means you turn the deed back over to them before foreclosure, and they agree not to come after you for the difference.
Remember if they sell the house for less than owed then can attach it to you as personal loan debt. meaning you still have to repay the difference. If they waive the difference, you are liable to pay taxes on that as income to the IRS.
Deed in lieu of foreclosure takes you off the hook for the last 2 scenarios.
good luck