Judgment Amount
I guess if the property goes to auction the home owner will get a judgment for sure (in SS they may/ may not get a 1099/ judgment). But the judgment amount? Is it the difference between mortgage payoff and selling price at auction? If its REO does the lender wait until they resell the property and then file judgment as difference between selling amount and all the losses (holding, RE commission etc...)
I am still trying to figure out the judgment amount! I got different answers from local investors.
One of the investors said that the lender will open the bid (at auction) for payoff amount and usually will get the property back; so there is no deficiency judgment.
Also, CW told me that its possible to do a DIL (for an investment property) but the home owner may get a 1099. So would it be better to let the property go to foreclosure and file Ch7 (bec if they return the property (DIL) and get a 1099 they will have to pay a huge tax; he has a few properties in foreclosure)
[ Edited by SKrei on Date 09/03/2009 ]
When the Lender files a foreclosure lawsuit, one of the final steps before the sale is to obtain a Final Judgment.
The FJ is normally the principle owed, plus carrying costs, legal fees, interest, property maintenance fees, if any, sometimes taxes, insurance, etc. The total amount is called the Final Judgement.
At the auction sale, the Lender (Plaintiff) has the option of selecting the amount of his high bid. Many times it is the FJ amount. Occasionally it is slightly above the FJ amount to include interest to sale date.
Quite often these days (since so many homes have negative equity) the Lender discounts the FJ and drops their high bid price, sometimes drastically because the Lender does not want to own the home.
Although Deficiency Judgments are possible, I have personally NEVER SEEN a Lender go after a borrower for the shortfall in a Real Estate foreclosure or REO sale. You are worrying about a very unlikely event.
[addsig]