Repo. Question ?

Question

Are mortg. companies and banks after home repossession and the sale of that home required to give equity or profit back to the mortgagee ?

I'm located in R.I.

Thanks

N/A N/A · Answer

The banks generally keep any profit from the post auction sale, if there is any, but there seldom is.  I believe they are regulated form making an overall profit from their sales in aggregate.  Here in Washington State, though, they are required to return the any excess funds from a trustee sale.  It's been a while, but here in Washington State  I believe the banks are required to deposit the funds with the court system for a set period of time and the past owner was required to petition for them.  We bought a second one time and went to auction to protect our interest.  We knew we should recieve all the money up to the amount of the second so we were free to bid up to that amount.  The bidding stopped earlier so we took the property.  When it came time to collect our excess proceeds the holder of the first balked, then when pushed, returned us a smaller amount, claiming that further accounting showed more costs then they revealed to us before the auction.  Of course, they refused to give us an adequate accounting.  It was less than $2000.00 bucks so it wasn't worth sueing over.   The bank violated the state law by not depositing the funds and then by refusing to turn them over at first.  I remember sitting at my desk with the State Law in front of me and talking to their attorney.  Either the Attorney didn't know the law or was trying to snowball me but it was like pulling teeth to get our money.  The attorney told me we had no recourse, that they could keep the money, that we had been stupid in investing in the second and other things.   Fortunately we knew what we were doing and prevailed, albiet short of what we should have gotten. Considering what we went through, I doubt that there are many, if any, homeowners that get what is rightfully theirs.

Account Closed · Answer

Adding to Peter's comment...

The only time a bank will get a property back is when no one else bids higher at the auction. Banks open at what they are owed (sometimes lower). They do not bid up the property as a bank can not legally hold property for investment.

If a lender has an REO it means the other investors did not want it. Granted that can happen when there are title issues at the time of the auction.

Banks do not look at foreclosures as profit opportunities.

John Corey

Peter Vekselman · Answer

Once a foreclosure takes place the title (deed) is transfered over to the bank.  That means they become the owner of the property.  And just like any owner, they will enjoy all the upside and suffer on all the downside of the deal.

N/A N/A · Answer

[code:1]2 They will sell the property above and beyond what they have in it. In this case they will keep all the profits.[/code:1]

How can they legally keep the profits ?

Peter Vekselman · Answer

Once the property is foreclosed, it is then owned by the bank.  When they sell the property one of to things will happen.

1  They will not sell it for enough profit to recoup what they have into it.  At that point they may decide to go after the original borrower on whom they foreclosed for the amount they lost, or they may just absorb the loss.

2  They will sell the property above and beyond what they have in it.  In this case they will keep all the profits.

Frank Adams · Answer

I saw (IIRC in "Business Week") a few months ago that the average cost to the lender, nationwide for a foreclosure was about $73,000. That'll eat up most, if not all of the equity.

Although I've foreclosed on a few of my seller financed first mortgages for as little as $1100 I have no reason to doubt those figures.

1. I start the process right away. Miss January's payment and I'll be at the courthouse the first week in March.

2. My lawyer works a bit cheaper than "corportate" types on staff at banks.

3. My houses are much cheaper than the nationwide average.

all cash

N/A N/A · Answer

I don't know the rules of Rohde Island but in general, I believe so.

There are so many costs that they can add on, however, that you'll likely never see any of it.