[WorkoutRay]

My wife and I were having a discussion about homes being foreclosed upon. Let me set up the problem or question. Assume that someone (lets call me Adam) bought a home for $500,000. Adam put down $100,000 and got a loan for $400,000. He made payments for let say one year but then lost his job and was unable to continue making payments to the bank. The home went into foreclosure. Now the bank took the home over and was able to resell the home for $550,000.
Now our question is "After the bank recoups their $400,000 does Adam get any or all of the profit made on the foreclosure sale?

[Kstar4u]

I believe so... less any legal expenses (and the usual suspicious charges). It would be fair to assume that Adam might have added equity by improving the original property or he should at least be entitled to benefit from the equity he earned while he was paying for the banker's lunch.

[Fr_Chuck]

well if it ever actually happens like that, this is how it really happens,
they put 100,000 dollars down, and have a loan for 400,000.

They foreclose, and have 5000 in legal fees, late fees, foreclosure costs, and cost of the sell, so you have another 20 to 30 K added to the cost of the loan.

The house is stold at auction, normally the mortgage company bids their loan price as the starting bid, seldon is there ever another bid,
Of if they sell it, it will sell for 300,000 or maybe max of 400,000, it will never bring anywhere near apprasied value at a foreclosure sale.
so there is almost always a amount owed that is not even paid off at the sale.
So as noted the bank with the loan normally ends up owning the property now form the foreclosure aucton sale, and now they go and sell it for the 450,000 and all the extra money is their profit and they keep it.

[ebaines]

I agree with Fr_Chuck - this doesn't seem like a plausible scenario. Let's see: Adam had $150K equity in a home and he just abandoned it? He didn't think about selling the home? Adam is either so rich that he doesn't have to think twice about leaving $150K for someone else to pick up, or he needs a good counselor.

[AW805]

If that was the selling price at the auction it would be less any costs/fees that were incurred and hopefully Adam didn't have any additional liens placed upon the property including taking out any lines of credit then yes he would get the refund.

[Fr_Chuck]

Please understand foreclosure homes at auction seldom bring 50 or 60 percent of their value. And almost all of them end up being bought by the company that holds the first mortgage, since they buyit for their loan amount.