Can a Bank Legally Make a Profit on a Foreclosed character?
As edges are foreclosing hundreds of thousands of similarities across the country, the question keeps arising, “Can edges make profits on foreclosed similarities?” The simple answer is yes, but it does take some special circumstances for it to happen. If the homeowner is aware of how to protect his equity, he may get paid already if he loses his home to the bank.
If the lender talks the homeowner into giving up his character in exchange for a deed in lieu of foreclosure, the bank can make a profit on the sale and not have the additional cost of the foreclosure. It is generally accepted in the banking industry that a foreclosure costs an average of over $40,000. These costs include loss of interest, loss of additional lending strength, increased Federal save requirements, costs of the sale, maintenance of the character and commissions to a selling agent.
The meaningful to whether the bank can make money is dependent on the character having equity. Probably 20% to 35% of the time when a foreclosure takes place, there is equity in the character and there are no second or junior liens in place. Many homeowners simply walk away from their homes believing they don’t have equity or can’t sell their home while it is in foreclosure.
If the bank takes the character to the foreclosure auction and extinguishes junior liens, they will be creating equity in a matter of minutes. However, if the character has junior liens, the lender will not accept a deed in lieu of foreclosure because the junior liens will stay attached to the character. So be careful, if a bank offers a homeowner a deed in lieu of foreclosure, there may be equity in the character.
Once the character goes to auction and is purchased by the bank, the character’s deed transfers to the bank after a redemption period. At this time the bank can sell the character for at all event price they can get. If a profit exists, the bank is entitled to it.
In summary, once the bank foreclosures on a character it is entitled to make a profit. Prior to their ownership, they cannot sell the character, only the deed holder (homeowner) can sell it. This happens in short sales all the time as the bank has to agree to the sale price but the homeowner must sign the deed move. In these situations, the bank takes a substantial discount on their mortgage to get the character sold and off their books. If the bank is out bid at the auction, which is anything close to their final judgment amount, they get their money owed but lose out on any additional profit.