Many people facing foreclosure do not realize it, but there are several areas of the law that prohibit a mortgage lender from taking advantage of homeowners in a foreclosure situation. Every day, borrowers claim that their mortgage company “just wants my house because it is worth more than I owe.” In a few cases, this may be true, but legally, the lender must sell the home at sheriff sale for its fair market value and pay the former owners any proceeds over and above the amount owed. Banks may try and take advantage of the fact that most consumers do not know their rights when it comes to foreclosure.
The main issue homeowners run into is a lender selling the home as quickly as possible at a county auction, just to pay off the mortgage. They never seem to care about the previous homeowner and the money they could receive from a fair sale. For example, assume a home is worth $300,000, but the total payoff is only $275,000. The mortgage lender has a legal obligation to sell the home for as close to its fair market value as possible, which is $300,000. This would mean the former owners would get $25,000 back after the sheriff sale.
What usually ends up happening is the bank accepts the first offer they receive of, lets say, $250,000, then they sue the home owner for a $25,000 deficiency judgment. In a case where the bank should be paying $25,000 to the homeowner, they end up stealing the home and an additional $25,000, due to their refusal to sell the home at its fair market value! This is clearly a violation of the lender’s duty to obtain a fair and reasonable price for a property that it is foreclosing on due to nonpayment of a loan.
For homeowners in the process of having your home foreclosed on, or those who have already lost the house to foreclosure, then it is imperative that the find out the current market value of the property. Borrowers may be owed thousands of dollars in the event the home is, or was, sold for less than it was worth. In fact, there are numerous cases where previous homeowners have gotten settlements in court for tens of thousands of dollars due to the bank’s violations. Understanding foreclosure rights and the laws when it comes to facing foreclosure is probably one of the best ways of avoiding losing a house altogether. If homeowners did not understand their rights and were taken advantage of, there is a chance they can get their home back, or at least sue the lender for its misconduct.
The best way to determine a home’s value is to is to get a full appraisal from a local, qualified appraiser. However, this can be somewhat costly, after facing foreclosure and it may be hard to justify “throwing good money after bad.” A better recommendation is to get a Broker’s Price Opnion (BPO) or Property Valuation from a qualified source. I do not recommend using an online service that offers a free valuation, because they are rarely accurate and do not take into account the condition of the home or improvements made.
Ultimately, if a lender violated its duty to homeowners when foreclosing on a home and sold the home after the sheriff sale for a higher price, then borrowers need to take action sooner rather than later. Homeowners can not just sit back anymore and let the lenders get away with breaking the laws and taking profits on sales that they are not entitled to. As well, borrowers can not remain in ignorance of their rights, their lenders’ duties, and simple fair dealings. Homeowners should take action today and force their lenders to answer for their wrongdoings and corruption.