A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

A property is sold at auction for about $165,000, but the loan balance of the mortgage was about $255,000. Does the bank come after the defaulting borrower for the $90,000 the bank lost, or does the borrower walk away without any further liability to the bank?

A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

Wow all of the above are terrible answers.

The true answer is: it depends.

Many states are non-recourse states, which means that lenders cannot go after you for the remainder of the balance in your situation. The IRS, however, may tax you on the difference because in essence it is %26quot;phantom income%26quot;. Although you never physically saw the money you did borrow it to purchase your home, and you could be taxed on it.

That being said, President Bush recently passed a bill relating to this issue:

http://www.opencongress.org/bill/110-h36...

%26quot; The current tax code requires a lender who forgives debt to provide a Form 1099 to the IRS stating the amount the borrower has been forgiven. This disclosure applies whether it is a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt. If the property is sold at foreclosure or is sold for less than was borrowed, that difference is considered income and is subject to the tax.

H.R. 3648 would ensure that any amount forgiven on mortgage debt secured by a principal residence will not be taxed. The legislation has a provision to safeguard against abuses. That provision is similar to one that already exists for commercial real estate owners and would treat commercial and residential property equally.%26quot;

Note, however, that this bill does not apply to homeowner's who pulled out equity out of their home.

A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

YES! They still could come after you for the balance!!

A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

A deficiency judgement most likely will be entered and the buyer will owe that money. The judgement can be renewed many times as well and for that kind of money likely will be.

IF the bank forgave the loan they may choose to report that as a gift and there COULD be taxes owed on the %26quot;income%26quot; of $90K THOUGH there is legislation that was passed that does not make that an automatic.

A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

The borrower is in forclosure.

The bank is trying to sell the property for a low price to get it off there books.

At time of closing you will get a clean title, no you are no liable!!!!

Great time to purchase homes!!! Take the deal, but get an inspection to make sure there are no major repairs or water in the basement, that would suck to get suck a great sales price and not expect to have to put 10's of thousands of $ into in!

Again it does not matter what the mortgage balance is the mortgage company wants to get it off their books and collect as much of the balance as possible to sell in a fast short period of time!

GOOD LUCK!

A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

No, the borrower is responsible for the $90,000. The bank will go after them for that amount and will do whatever measures they have to, to get that money, they will go to court, get a judge to grant an order that the person owes them that money, and then they will garnish wages, take tax returns, do whatever they have to to get their money back. If the borrower didn't want to lose their home, and go through this maybe they should have made their mortgage and if they were going through rough times call the bank and let them know and work something out with them. Banks do not like and want to foreclose on someones home, they would much rather work with the person on a month or twos mortgage, then take the home back and have to go through the hassel of collecting the funds afterwards.

A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

Not if you were declared insolvent !!! or bankrupt !!!

A house is auctioned for less than the outstanding loan, is the borrower liable for the balance?

The lender can in fact come back to you for the remaining balance. Even though they have taken the deed of trust or mortgage off the property as a lien, the note still secures your promise to pay, even if it's a forgiven debt. Some banks will not do this, because obviously, you have nothing, but others will. Good Luck!