What happens after a foreclosure auction?

by oliver on September 30, 2010


What happens after a foreclosure auction?


After the foreclosure auction takes place, there are several steps involved. Firstly, the money from the auction must be distributed to all the parties involves. According to the Foreclosure Workbook by Carla Douglin, the funds are to be dispersed, giving priority to property taxes payments, then mortgages and other creditors. If there is any surplus funds left, the amount should be returned to the borrower.

If the property is still occupied after the sale of the home, a notice of eviction is given to the previous owners. The new owners should wait fora certain period of time, which depends on the state, to file an eviction notice. If in any case the price of the winning bid during the auction cannot cover all the costs the bank or the lender has incurred, the bank may ask the court for a deficiency judgment.

Filing for a deficiency means that the original owners of the property still owes money to the bank or lender. Some states allow this to happen while some do not. Certain states also give an opportunity for the previous owners to purchase the home or property after the auction. This is called as the redemption period which is dependent on the rules set by each state.

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