Many states give you — the homeowner (borrower) — the right of redemption, which means that you can halt the foreclosure process right up to the time of the auction if you can come up with the cash to pay the outstanding amount. You must research your state’s laws to determine whether this applies in your situation. At the auction, the highest bidder might purchase the home for cash. Relatively few buyers can pay cash on the spot, so the lender could enter into an agreement to take back the property from you, the borrower, in exchange for wiping out your debt. This agreement is known as a deed in lieu of foreclosure, and we’ll explore it in greater depth in Chapter 6.
HOW THE PRICE IS DETERMINED TERMINED
Unlike a traditional home sale, in which the seller compares properties to determine how much the home is worth, the lender will go for a different method. The starting bid will include the balance of the unpaid loan, interest owed, attorney fees, and costs incurred from the foreclosure process.
WHAT IF IT DOESN'T SELL?
In the event that no one buys the home, ownership reverts to the lender. This bank-owned or “real estate-owned” (REO) property means that the lender now assumes all property rights and responsibilities. Those responsibilities include property care and maintenance. The lender then usually works with a real estate agent to find a buyer. Online sites, such as Zillow, offer some bank-owned properties for sale. Some lenders resort to a liquidation auction, selling their REO properties at a private auction house or in a convention center. The home will be sold “as is.” This means it’s sold in its current condition and the lender will not be making any repairs or improvements.
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