Mary Johnston: What Happens After The Foreclosure Sale Date?

Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

Formally, a mortgage lender (mortgagee), or other lien holder, obtains a termination of a mortgage borrower (mortgagor)’s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure).

Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, it is a cloud on title and the lender cannot be sure that they can repossess the property. Therefore, through the process of foreclosure, the lender seeks to immediately terminate the equitable right of redemption and take both legal and equitable title to the property in fee simple. Other lien holders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue homeowner association dues or assessments.

What Happens After the Foreclosure Sale Date?

As a homeowner, the last thing you want to think about is losing your home. But as many people have found, it’s common to struggle with those hefty mortgage payments, especially if you lose your job or the housing market crashes. Even if you have fallen behind on your payments, you may be able to get back on track and save your home. However, if you’ve exhausted your options and face foreclosure, it’s important to know what happens after the foreclosure sale date.

Can You Get Your House Back After Foreclosure?

No. Not in Utah. Some other states allow for this under a process called “statutory redemption.” Under this rule, you have a limited amount of time to pay the foreclosure sale price (plus interest in many cases), and you are usually allowed stay in your home during the redemption period, whether it’s 30 days or two years.

Some states permit a foreclosed homeowner to buy back the home within a certain period of time after the sale. This is called a redemption period. To redeem the home, you usually have to pay the total purchase price, plus interest, and any allowable costs, to the purchaser who bought it at the foreclosure sale. In some states, though, you’ll have to pay the total amount owed on the mortgage loan, plus interest and expenses.

The deadline and procedures for exercising a right of redemption varies from state to state, and not all states provide a redemption period after the sale.

In order to redeem, the former homeowner has to come up with another source of financing. But getting a bank to lend you money after a foreclosure can be very difficult, even if you have a steady income, because your credit score will have taken a bit hit.

Some special programs are available to help homeowners in this type of situation. For example, a program called Stabilizing Urban Neighborhoods (SUN) offered by a nonprofit organization helps foreclosed homeowners in Massachusetts, Maryland, Rhode Island, New Jersey, Illinois, Connecticut, and Pennsylvania by purchasing foreclosed properties and then reselling those properties back to the former homeowners, usually at current fair market value, with a new, fixed-rate 30-year mortgage.

If your state provides a redemption period after the sale, you sometimes have the right to live in the home payment-free during this time. For example, in Michigan, most homeowners get a six-month redemption period (some people get a year) during which time they can live in the home. (Under some circumstances, though, like if the foreclosed homeowner unreasonably refuses to allow the purchaser to inspect the home, the purchaser can begin an eviction sooner.

By staying in the home during the redemption period, you can save money by living rent-free. This way you can use the money that you otherwise would have spent on housing to pay other bills and start rebuilding your credit.

In some cases, you might be able to remain in the home as a tenant after the foreclosure sale. For example, Freddie Mac offers a program that allows recently foreclosed homeowners to rent their home on a month-to-month basis, if Freddie Mac acquires the property as a result of foreclosure. (You can learn more about this program, called the Freddie Mac REO Rental Initiative, at the Freddie Mac website. If you want to find out if Freddie Mac owns your loan, go to http://www.freddiemac.com/mymortgage or call 800-Freddie.)

Live in the Home until You’re Evicted

If you don’t move out after the purchaser gets title to the home (typically either after the sale or after the redemption period), the new owner (often the foreclosing party) will start eviction proceedings to remove you from the property. The length and procedures for the eviction process varies from state to state. In some cases, the foreclosing party can include the eviction as part of the foreclosure action—depending on your state’s law and the circumstances of your case—while in other instances, it will have to file a separate eviction action with the court.
You might receive a notice prior to the start of the eviction (called a Notice to Quit), which gives you a certain amount of time—for example, three days—to leave the home before the eviction officially starts. While you can stay in the home until you’re forcibly removed through the eviction process, it is generally best to leave the property before this time period expires. (You can learn more about eviction after foreclosure in Foreclosure Timeline: Getting Notice to Leave.)

Getting a Cash for Keys Deal

To avoid having to complete an eviction, the purchaser might offer you a “cash for keys” deal. With this arrangement, you agree to leave the home by a certain date, and in good condition. In exchange, the purchaser gives you a specified amount of cash to help pay for your relocation costs.

Moving Out Voluntarily After the Foreclosure Sale Date

If you’ve stopped paying your mortgage, you’re allowed to remain in your home until the foreclosure process is completed. Once you reach the foreclosure sale date you go from being a homeowner to a tenant, as title legally passes from you to the new owner. Some owners may agree to rent the home to you, but most will want to take possession as soon as possible. Each state has its own laws and regulations governing this process, including the amount of time an owner must give you to vacate the property.
At this point, you can move out voluntarily, attempt to redeem the property through statutory redemption, or wait until the sheriff shows up to execute an eviction. Because the eviction process takes time and money, some owners will actually pay you to move out voluntarily, a practice called “cash for keys.” This arrangement spares you the hassle of an eviction and provides you with some extra funds to help with your relocation.

Eviction after Foreclosure

So what happens after the foreclosure sale date if you’ve decided against moving out voluntarily? In that case, the new owner will try to force you out. However, this must be done formally through the court using the eviction, or “unlawful detainer”, process. Once you’ve received a notice of eviction, you can still move out voluntarily. Otherwise, you will be escorted off of the property in a matter of days by local law enforcement.
It’s also important to know that an eviction can further damage your credit score, making it difficult to obtain a loan or convince a landlord to rent to you. Many housing applications and even some job applications will ask if you’ve ever been evicted, and landlords and employers can verify this information by examining evictions in public records.

Rebuilding Your Finances after the Foreclosure Sale Date

Whether you move out voluntarily or are evicted, a foreclosure does significant damage to your credit score. This makes banks very hesitant to lend you money, and makes landlords question whether you’ll pay rent consistently. As a result, you should start saving as much money as possible during the foreclosure process in case you need to pay a higher deposit to ease the concerns of your future landlord. Additionally, you’ll need to focus on rebuilding your credit by paying bills on time and getting control of your debt. After seven years, the foreclosure should disappear from your credit report, making life a little easier.

What Happens if My Landlord Goes into Foreclosure?

It’s also possible to be seriously affected by a foreclosure even if you don’t own a home. This is the case for renters whose landlords fail to pay their bills. Without even knowing that a foreclosure is taking place, you could receive a notice to vacate the property – even if you have many months left on your lease. Fortunately, you should be given at least 90 days’ notice, and you may be able to sue your landlord to help cover the costs of relocating.

Be Prepared for What Happens After the Foreclosure Sale Date. Since a foreclosure has significant ramifications on your housing, finances, and credit, it’s important to consult an attorney as early on in the process as possible. Whether you’re trying to avoid foreclosure, or you’re in the final stages of one, you’ll need to know what your options are and what to expect after the foreclosure sale date. Be prepared and make well-informed decisions by contacting a local lawyer who has experience with foreclosures and foreclosure alternatives.
Options left after the Foreclosure Sale Date

Loan Modification

Modifying your loan is another option you have to stop a foreclosure. Your attorney can negotiate on your behalf with the bank to modify your loan and thus help you save your home. In most cases, your loan modification is likely to be accepted if you show that you are willing and able to pay back the money you owe.

If you had difficulties paying your mortgage due to a valid hardship — factors outside your control such as loss of employment, a chronic sickness that drained your finances, change in market interest rates and so on, your loan is likely to be modified. However, keep in mind that it is up to the bank to accept or reject your loan modification request. A good foreclosure defense lawyer will have a loss mitigation team to present your situation to the bank in such a way to get your loan modification approved.

Deed-in-Lieu of Foreclosure

Sometimes, a deed-in-lieu of foreclosure can be a better option than doing a short sale or modifying your loan. In a deed-in-lieu, you convey all the interests in your home to the bank to satisfy the mortgage debt and thus avoid the home being foreclosed.

When a deed in lieu is completed, you will be completely released from the debt associated with the mortgage. A deed in lieu will save you from the long foreclosure process, which usually increases the amount of deficiency due to attorney fees incurred by the lender to initiate and execute the foreclosure. Moreover, your credit will not suffer as much as it would should a foreclosure take place.

Filing for Bankruptcy

Filing for Chapter 7 or Chapter 13 bankruptcy can help to delay the foreclosure sale date. During this period, the attorney can work out a deal with the bank’s attorney to modify your loan repayment terms.
In most cases, foreclosures are initiated after you have repeatedly failed to service your monthly payments. If financial hardship is the reason for you failing to pay the mortgage, you are likely to be given new terms of payment. However, this decision is not automatic and will depend with the bank.

Short Sale

When the date of sale has been delayed, you can opt for a short sale rather than wait for your home to be auctioned. Remember, the bank is only interested in recouping back their money and if your home is auctioned, it may go for a price that is much lower than its market value. Moreover, if the money the home fetches is not enough to cover your debt, you will be responsible for paying the remaining amount known as a Deficiency Judgment. A Deficiency Judgment must be filed by the bank within four years of the foreclosure sale date.

A short sale can help you get a fair price for your home, pay off your remaining mortgage balance and remain with a good amount of cash to help you move on. This is a better route than waiting for the home to be auctioned.

The most important thing to do when you receive a foreclosure sale date notice is to contact and cooperate with an experienced foreclosure attorney in your area to help you determine your next step. Call Ascent Law LLC today for your free consultation.