What happens to your cash down payment during a foreclosure?
Question:
Answer:
It all depends on what the lender is able to get for the house after they foreclose on it and put it on the market. They will assess charges against you for the total unpaid balance, together with accrued interest, plus any expenses they incur in processing the foreclosure, including attorney and other legal fees.
If your $500K house sells for $450K, the lender will retain roughly the $400K needed to retire the mortgage and those other fees. In such cases, I can guarantee you they will find some way or other to find $50K in foreclosure expenses to charge against you.
If your calculator is working you can quickly figure out this will leave you with zero dollars.
I suggest that you see if your lender would be able to take less than the total mortgage amount to have someone buy the property but for less than the total outstanding (its called a short-sell) -- its better than going through a full foreclosure -- but your credit will still take a substantial hit [i disagree with line 13] (but at least you wont lose all of your 100K)
See a real estate attorney and accountant to ensure this will work in your state.
See this section:
Find a buyer. In order to do a short sale, you'll need to come up with a buyer to pay off the amount of money your lender will accept. The new buyer will not assume your mortgage, rather, the sale of the property will result in you paying off the mortgage directly and the buyer having his own new mortgage on the property.
Contact lenders. It is now time to get a lender involved with the deal. Indicate to him that you are interested in a short sale, and share the information on your specific property with him. Depending on what percent of the estimated value you offer the bank, the lender may accept your deal or not. It can be difficult to find a lender with the authority to accept a discounted amount for the loan payoff, so do not think the first broker you call will jump on the case.
Proving insolvency. You must prove that you are incapable of paying off the entire mortgage and/or staying current with payments month to month. The lender will perform another mortgage application process to discover if you are, in fact, incapable of the financial responsibility you agreed to when you got the original mortgage. If the root of your financial woes occurred before you received your first mortgage, the lender may have a case against you for fraud-so beware. Also, know that lenders will almost never do short sales for properties with second mortgages since the lender in the second mortgage will not be happy about forfeiting his investment.
Sell the property. Once your lender has okayed the deal, and you have a buyer, you are free to sell the property. The lender will want to see a contract between the seller and the buyer indicating that the sales price is the exact amount of payment that the bank will be receiving from the seller. The bank wants to be sure that you (the seller) are not pocketing extra money off the deal.
If that's the whole story you need to sell this house and try to recoup some of the down payment.
Letting this house go into foreclosure is the worst thing you could let happen. You most certainly lose every penny of equity and will most likely end up owing the bank money after they sell it.
Are you that naive? That money is GONE. It went to BUY the house. It's not like a security deposit you get back on an apartment rental.
It will depend on how much the loan eventually grows to, with interest, late fees, court costs, attorney fees, etc., and how much the property sells for at the sheriff sale.
If the property sells for an amount greater than how much you owe, you will receive the difference as your proceeds from the sale. If it doesn't sell for what you owe on it, you'd end up with nothing.
The proceeds from a sheriff sale go towards paying off any delinquent taxes, then to the first mortgage company, then any other mortgages. The rest will be paid to you as your profit.
The properties are usually sold at a loss, though, meaning that the bank doesn't even get its entire loan paid off, so there's little chance that you'll see much from the sheriff sale. You'd be better off trying to get the foreclosure process put on hold for now and the sale postponed, if need be, to get more time to sell the property. A short sale wouldn't really work, because most lenders won't take a lower amount if they see you walking away with a lot of extra cash.
Good luck.
ForeclosureFish
http://www.foreclosurefish.com/...
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