What happens if a foreclosed home sells for a LOT less than it is worth?
2 things happen 1st- in most cases the bank has the option to sue the former owner for the money not collected at the foreclosure sale, in this case the additional $75k. This would involve a court judgement and collection actions. It is not the homeowners fault, but it is the homeowner’s responsibility to see the debt is paid back in full. If they can’t pay by payments then they must by foreclosure, and if the foreclosure doesn’t work then they are still responsible for the remainder of the debt. Only a bankruptcy, or an agreement with the lender, can discharge an unpaid debt. By the way, the bank has a fiduciary responsibility to both the former owner and their investors to get as much out of the sale of the property as possible, and they try, often too hard. The problem is that owners normally stop doing maintenance on the property, and often tear up the property when they leave, stealing sinks and knocking holes in walls. Then the property sits vacant for several months and damage h
