When Is Foreclosure Final?

Most homeowners assume a foreclosure is final when the home is sold through a public auction. In some cases, the foreclosure is not final for months or even a year. Certain states grant homeowners the right of redemption. Redemption rights allow homeowners to regain ownership of the home by paying the entire loan balance plus associated fees within a specified period of time.


Foreclosure Laws

Each state has its own unique set of foreclosure laws. The laws determine whether the foreclosures are executed judicially or non-judicially. Some states can use either method, while others only allow one or the other. For example, Florida, Illinois and Indiana are states that require the lender to foreclosure through the court. In a judicial foreclosure, the lender files a lawsuit against the homeowner to obtain permission to foreclosure the home. A few non-judicial foreclosure states include Idaho, Massachusetts and North Carolina. A power of sale clause in the mortgage deed allows lenders to sell the home in the event of your default. Foreclosure laws determine how the procedure is executed and how long the process takes. A home can be foreclosed in as little as 30 days or the process can take longer than a year, depending on the state. State laws also grant or deny the lender the authority to pursue a deficiency judgment for the difference between the loan and the sale price of the home.


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Sale of the Home

Foreclosures are sold through public auctions. Once ownership is transferred to another party, you will need to vacate the home. Even if the home does not sell in the auction, the lender regains ownership of the property and you will be forced to move. If there is no redemption period, you will need to leave immediately. If you fail to move, the new owner will need to evict you by filing an eviction notice with the court. If you have a right of redemption, you are able to stay in the home until the redemption period expires.


Right of Redemption

The right of redemption provides homeowners additional time to attempt to save their home. The length of the redemption period varies by state. In some states, redemption rights are only offered when the home is foreclosed through the court. If you intend to redeem the home, you will need to pay the balance of the loan, court and legal fees, past-due taxes and insurance and any other associated mortgage debt before the end of the redemption period. The sale will be voided upon payment. Homeowners who are unable to pay can remain in the home until the last day of the redemption period.


Delaying Foreclosure

Homeowners can delay or possibly prevent foreclosure by filing bankruptcy. After a bankruptcy petition is filed, an automatic stay is issued to stop collection activity. The foreclosure will be postponed until the bankruptcy is finalized, which typically takes several months. Chapter 7 bankruptcy discharges debt if you are unable to pay and meet the income criteria. Chapter 13 bankruptcy places homeowners on a structured payment plan for three or five years before certain debt is discharged. The home can be kept under Chapter 13, provided you resume making your mortgage payment. Bankruptcy has serious credit consequences. Contact a HUD-approved foreclosure-prevention counselor to discuss bankruptcy and other possible options.


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