If you fall behind on your mortgage payments, and don't come to some sort of resolution with your lender, you're going to end up in foreclosure. The end result of foreclosure is often a public auction.
The foreclosing party is obligated to publicize the auction in advance in local newspapers and online. On the day of the auction, the property will be sold to the highest bidder. That's the goal, anyway. But sometimes there aren't any buyers at the auction willing to pay the minimum price that's been set.
When that happens, the lender will usually take the home back. According to RealtyTrac, in 2016 71.5% of completed auctions in the U.S. resulted in homes going back to the foreclosing lender, and the remaining 28.5% went to a third-party buyer.
To minimize their loss, or even make a profit, the lender will scoop up the property in the hopes of selling it later in a regular sale. They can rent the home to the former owners to keep it occupied, make repairs so the home is more attractive to buyers, and/or wait for the value of the property to increase before selling.
That's if the auction is completed. Sometimes the purchaser will back out or fail to deliver all of the funds and a new auction date will be set.
If your home is sold to someone in an auction you still have some time in the home before you have to leave. You're not obligated to vacate until you've been evicted, which can take months.
Some homeowners assume that foreclosure is imminent and move out, but for some reason the foreclosure doesn't go through and they're still responsible for the property as fees continue to accumulate. That's what's known as a zombie foreclosure, and it can come about when a homeowner has a sale date and leaves, but then the home doesn't sell at auction.
Overturning A Sale
It is possible to vacate the sale of a home at auction if there's cause to do so. For example, you may be able to prove that you were under review for a loan modification at the time of the sale, and therefore it should never have happened. Our law firm has represented a client in that situation, and we were able to have the sale vacated.
There are also other circumstances, which include “gross inadequacy of consideration, surprise, accident, or mistake imposed on complainant, and irregularity in the conduct of the sale.”
Stopping A Foreclosure Sale Date
Better than getting a sale overturned is stopping a sale before it happens. Depending on where in the process a homeowner is, their circumstances, and the laws of their state, there are ways to avoid a sale date.
Homeowners in New Jersey, which is a judicial foreclosure state, have statutory rights to adjourn a sheriff's sale for 14 days for any reason. All a homeowner needs to do is go to the sheriff's office and pay a small fee and the sale is postponed for two weeks. And this can be done twice. But that's only a temporary fix.
A Permanent Solution
The best permanent fix for homeowners facing foreclosure who want to keep their home is a loan modification. A loan modification is a permanent change to one or more of the terms of a mortgage loan, such as the interest rate, term length, or principal balance. Once approved for a loan mod, a mortgage is returned to normal servicing, often with a lower payment.
When you're under review for a loan modification, the bank isn't supposed to pursue foreclosure. For them to do so is called dual-tracking, which is a restricted practice. If you have a sale date scheduled and then get approved for a trial modification, the bank is obligated to cancel the sale date.
There are also a number of foreclosure defenses and actions that may be appropriate to your situation, such as a suggestion of bankruptcy or questioning the standing of the foreclosing party.
Remember that a foreclosure auction doesn't come out of the clear blue sky. In a judicial foreclosure state the legal process will play out over months and you should receive notice of everything that's happening. The average time to foreclose is more than 1,000 days in many states, so there's a lot of time to find a way to avoid an auction sale if you take the right action.
Even if you can't keep your home you may be able to get thousands of dollars to voluntarily give up ownership of the home in a cash for keys agreement.
But you need to have good information to know what your options are and how to go about achieving them. Consider working with an experienced attorney who can advise you and work to defend you from foreclosure.