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Equity in foreclosed homes
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Equity in foreclosed homes
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Posted by snoopdogMs on 8/22/10 8:34am
Msg #349961

Equity in foreclosed homes

What happens to the equity when homeowners walk out in the night and the home goes into foreclosure? Did I read somewhere that the purchaser of this foreclosure receives some of this if there is anything left over after the note has been covered during the transition and any handling charges?

Reply by 101livescan on 8/22/10 8:57am
Msg #349964

I haven't had a home with equity go into foreclosure EVER. The debt is always at least 100% more than the home value. Where in this country are there foreclosure homes with equity. Now that would be a good investment!

Reply by GA/Atty on 8/22/10 9:27am
Msg #349966

Happens all the time in GA

Thats why folks other than the lender show up to bid at foreclosure sales - the lender generally bids the amount of the debt and then other investors bid more if they think it's worth it.

And any funds collected over and above the amount needed to pay off the debt go to the former homeowner who walked out.

Reply by Philip Johnson on 8/22/10 10:40am
Msg #349974

There is no money left over here

Most of the house's here that go to auction are so far under water, scuba gear is needed for the inspection.

Reply by 101livescan on 8/22/10 11:10am
Msg #349977

Re: There is no money left over here

Good one, Philip. Most of the foreclosures I have revert to the bene. Those that go to auction for the swarm of investors are properties the bank doesn't want to deal with, usually having to do with demographics and soft market. I did have one with $330K debt go to auction for $80.6K, not a bad deal, but there are no jobs, hard to buy when you have no money. So investors end up holding for longer than they want to.

Reply by PAW on 8/22/10 7:52pm
Msg #350035

Re: There is no money left over here either

Numerous foreclosures sales of bank owned property have equity. The bank just wants their costs covered by the sale. In that case, the buyer gets the equity.

Take for example a house, valued at $200,000 with an outstanding mortgage balance (including all fees and foreclosure costs) of $150,000. The sale nets the bank $125,000 and has to eat the other $25,000 as a loss on the loan. The buyer pays $125,000 so essentially, they purchased a $200,000 house for $125,000, thus having $75,000 in equity.

There are plenty of investors who are buying up these properties that have sale prices (due to foreclosure or other reasons) way below their market value. The investor fixes up the house if necessary, and places it on the market at the fair market price. In time, the house may sell. The investor is aware that, in this area, it may take over 2 years before the house sells. But the owner has invested in that property and often takes a healthy profit for doing so. Here if Florida, we have one such person who invested heavily in the declining housing market over the past 5 years. (The person is running on the FL democrat ticket for US Senator.) He has made substantial profit from his investments. And so have many others.

Reply by ReneeK_MI on 8/23/10 6:04am
Msg #350074

depends if you mean actual sales proceeds or

'implied' equity. If it's actual cash proceeds from a sale - that reverts back to the person who was foreclosed upon.

I found a pretty concise explanation here - didn't source all the info, but a good read nonetheless:

http://ezinearticles.com/?Your-Equity-May-Disappear-During-Foreclosure&id=764460


 
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