Steps of Foreclosure

Foreclosure Misconceptions

There are many foreclosure misconceptions for both buyers and sellers such as their rights, responsibilities and the overall foreclosure process.

Foreclosure Misconceptions #1 - The bank wants your house back: Banks don't want your house back, they want to money that was loaned to you to buy your house. Foreclosures are time consuming and expensive for banks so this is typically the last resort. Most lenders today will work with homeowners to keep them in their house and avoid a foreclosure.

Foreclosure Misconceptions #2 - Bankruptcy Stops a Foreclosure: A bankruptcy does not stop a foreclosure, it only temporarily delays it. A bankruptcy is not a strategy to stop foreclosures.

Foreclosure Misconceptions #3 - Even if I get the money after the foreclosure process has started, I'm too late to stop it: Most states have laws that require foreclosure proceedings be stopped if the homeowner has the money to cover all back payments, late fees and legal fees that are owed.

Foreclosure Misconceptions #4 - The bank will take all my stuff: If your home is foreclosed on by the bank they can't take any of your personal property. However, any fixtures, floor coverings, appliances and anything else permanently attached to the house must stay.

Foreclosure Misconceptions #5 - Once the bank takes back my house, I'm no longer involved: After foreclosure, if the bank sells the house for less than you owed on the mortgage, you will still be responsible for the difference or "deficiency." And the bank can also collect interest on this amount. Consult a bankruptcy attorney to see if a deed in lieu of foreclosure or chapter 7 bankruptcy will clear you of owing a deficiency.

Foreclosure Misconceptions #6 - Foreclosed properties are in bad neighborhoods: In today's declining economic climate, foreclosed properties are appearing in every community and every part of town. Foreclosures are ranging from town houses to extravagant vacation getaways.

Foreclosure Misconceptions #7 - Foreclosed properties are typically in poor condition: Usually this isn't the case, however there could be significant maintenance and structural issues hidden behind an attractive facade. Do your research before purchasing any foreclosed property, being sure to find out how long maintenance has been deferred before the house was listed on the market, as well as how long it's been sitting empty.

Foreclosure Misconceptions #8 - Financial irresponsibility is always the source of foreclosure: This couldn't be further from the truth in today's economic environment. All it takes is the loss of a job, an unexpected health issue or other life emergency to put a previously solid financial picture in jeopardy.

Foreclosure Misconceptions #9 - Foreclosure guarantees bargain pricing: Before falling completely in love with what looks like a can't miss deal, be sure you know the property's true market value so you are not paying for more house that you are getting.

Foreclosure Misconception #10 - A loser price equals higher equity: This is one equation that won't pan out if a property involves unpaid taxes, mechanics' liens or an expensive string of repairs, all of which subtract from the equity and add to the overall cost of the house. Do your research before you purchase a foreclosed house.