Will the ex-homeowner still owe money after a foreclosure?
I'd like to know whether a person still own any money to a bank if his house ended up foreclosed?
From what I found out it says that yes and the borrower owns the difference that the bank sold the property for. If this is true is there a way to avoid this and prevent a bank to sell the house for less?
It could be a good business for a bank. Sell it to someone they know for and have the borrower to pay the full price still.
Is the bankruptcy the answer? If so how one can turn to a bankruptcy status?
The market target Ohio, USA
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Yes, the borrower is responsible for paying back the full amount of the loan. Foreclosure gives the bank possession of the property, which they can (and do) sell. Any shortfall is still the borrower's responsibility. But, no, the bank can't sell the property for a dollar; they have to make a reasonable effort. Usually the sale is done through a sheriff's sale, that is, a more or less carefully supervised auction.
Bankruptcy will wipe out the shortfall, and most other debts, but the downside is that most of the rest of your assets will also be sold to help pay off what you owe. Details of what you can keep vary from state to state. If you want to go this route, hire a lawyer.
Generally, yes, although not in all states. According to this article in Time:
But in non-recourse states — Alaska, Arizona, California, Connecticut, Florida, Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah, and Washington — the bank has no recourse beyond the repossession of the property.
As for the question about what price the bank can sell it: again, each state makes its own rules, and states may have rules against selling it for much below market value.
Quick Google for "ohio state law foreclosure deficiency judgement market value" turned this up:
Limitation on Deficiency Judgments. The property cannot be sold at foreclosure sale for less than two-thirds of the appraised fair market value. (Ohio Rev. Code §§ 2329.20, 2329.17).
(source:
www.nolo.com/legal-encyclopedia/deficiency-judgments-after-foreclosure-ohio.html)
It is in the bank's interest to sell the property for as much as they can (although it is doubtful they will put as much effort/time into selling it as the owner might). They will certainly not sell it for .
The main reason for this is that the bank would prefer to own 0k, than a loan to them from a customer for 0k.
Banks have to discount the value of loans to take into account the likelihood of the loan not being repaid. They classify certain loans as riskier than others, and these are discounted more heavily. An unsecured home loan to a customer that has already defaulted, has no collateral, and now needs to pay rent AND loan repayments would count as an extremely risky loan.
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