Discover the Greatest Secret of Foreclosure - Overage

An “upside down” property is when the money owed (mortgage) is greater than the fair market value (FMV) of the home. For example, if the FMV of the home is $250,000 and the amount owed is $275,000, the property is upside down.

This situation generally happens when there is a real estate market decline, the homeowner refinances more than 100% of FMV, or an equity line is added that is close to or above the FMV. In some areas of the country where there have been substantial market decreases, these same markets are retracting and leaving the latest home buyers, or buyers who refinanced, with upside down mortgages. Refinancing and allowing the property to go into foreclosure is getting to be a very common practice within the past few years.

When the homeowner is late on his mortgage for 30 days, he gets a Notice of Default (“NOD”) and continues to receive these NOD’s every thirty days until the loan is closed out by reinstatement or foreclosure. A little known fact is that lists of NOD’s are sold to mortgage brokers and anyone who will pay a few cents per name. These list buyers know that if the homeowner becomes a NOD, he is likely to become a foreclosure candidate shortly.

Whether the lenders and the credit bureaus both get paid for these names is uncertain, but list brokers re-sell these lists many times over. If you have ever been late by 30 days on a credit card or mortgage payment, you may have noticed that you start getting “refinance” or “you are pre-qualified” loan offers. This is because the lenders of high risk loans are buying the NOD list and sending you financing offers. Investors use the NOD lists knowing that once a homeowner is 60 - 90 days late on his mortgage, he is usually headed to foreclosure and 80% of the time, the loss of his home. If you are an investor reading this and buying these leads, unless your list vendor can sort the 30 and 60 days leads out, get another list vendor who is one of the original buyers of this information. It will cost you a little more per name, but the difference is not significant.

The real question is what options does the homeowner have for his upside down property?

1.)The homeowner can continue paying his mortgage with his only benefit being the tax deduction for his interest and his credit remaining in tact. Each payment is lost equity and can only be justified as a rent payment in his mind.

2.)The homeowner can stop making his mortgage payment, go into foreclosure and lose his home and tarnish his credit for years to come. However, he always has the option of moving on to another home using a “no credit” purchase program to buy his new home.

3.)He can ask his lender to do a loan modification to reduce his mortgage payments by extending them out 10 years, find a buyer for a short sale, request a deed in lieu of foreclosure or simply walk away from his home and let the lender repossess it by foreclosure, essentially the same result as “2.) above.

So as you can see, the homeowner has few choices to “stop his bleeding”
as it is known in the industry. This is the hidden foreclosure market that is just beginning to become obvious. Many homeowners with second homes or investment properties are making the choice to walk away and take their chance with credit repair later. However, the most objectionable consequence is the potential for a deficiency judgment by the lender for the deficit that wasn’t paid on the mortgage. The lender has the option to pursue a deficiency judgment or issue and IRS Form 1099 which gives the homeowner “phantom income” in the amount of the mortgage deficiency, which is a far better option that carrying a deficiency judgment on his credit report. Take these consequences into consideration if you have to make the judgment of whether to stay or leave your home behind.

The movie "The Secret" has been making its rounds, a few
months ago Oprah Winfrey picked it up and did a movie review
secret show, with promises for another one in the near
future. What is the Law Of Attraction?

Essentially The Secret is all about "manifesting" your
desires. Continually thinking about what you want in life,
centering all your focus around your goals and with enough
continual manifesting, these things then come into your
life.

The first time that I viewed this movie, I was blown away.
My own belief system was interfering in what I just saw. I
have read a number of books on self-improvement and I have
even ordered a variety of videos by some well known people,
but this movie will put you in an instant feeling of
gratitude and hope. I believe that the real secret is
sustaining the "rush" you receive after viewing this
movie.

THE SECRET website states that producer Rhonda Byrne, in
2004, discovered The Science of Getting Rich by Wallace
Wattles. It was given to Rhonda in a moment of crisis by her
daughter. This book from 1910 opened her eyes to a new way
of living and propelled her on a new-found mission to bring
the principles of the Universe to the masses - by creating
the film THE SECRET!

The Teachers featured in The Secret - Bob Proctor and Jack
Canfield have been studying, applying and teaching this
material for decades. They earn millions of dollars every
year. But that's not what makes this so powerful... many
people earn millions of dollars but they are not able to
articulate how they are doing it. Therefore, they are not
able to share the cause of their good fortune with others,
not even with members of their own family.

This is where Proctor and Canfield have distinguished
themselves... they Understand... they Apply... and they are
Masters at Transferring the Science of Getting Rich to
others. They are two of the most powerful coaches in the
world today.

Millions of people are already using the Law of Attraction
to make their lives successful. It is no longer a secret,
but a household term that is rightfully being given the
attention it deserves.

You too can learn how to use the "Law of Attraction" to
create whatever you want in life - be it money, love or
happiness - and generate abundance. It does not matter
how old or young you are.

Home foreclosures is not a topic that most of us like to talk about, especially if the possibility of home foreclosure is pointed at you. These days, however, the possibility of a homeowner losing their home has become a reality for many.

Need some advice on avoiding foreclosure?

Here is some general information about foreclosures.

Several states have a record number of foreclosures, such as Arkansas, Arizona, Colorado, California, Florida, Illinois, Massachusetts, Maryland, Michigan, New York, New Jersey, Ohio, Texas, Utah, Virginia, and Wisconsin.

CNN Money reports that adjustable-rate mortgages, especially mortgages that are considered, sub-prime adjustable rate mortgages, continue to contribute to foreclosures.

According to the San Francisco Chronicle, Americans borrowed $2.2 trillion dollars through attractive adjustable rate mortgages between 2004 and 2006.

These adjustable rate mortgages were hard to pass up with low monthly payments.

Unfortunately, these ARMS (adjustable mortgages) cannot last forever. Experts explain that these adjustable rate mortgages need to reset themselves in order to make up for the difference through higher rates, which means a higher mortgage payment.

You don't need to be an expert in real estate to figure out that when the banks significantly raise someone's mortgage payment, you are going to see many foreclosures.

It's also predicted that as these mortgage loans reset, 1.11 million homeowners will lose their homes. This prediction was reported following a study completed by First American CoreLogic, a firm that documents home mortgage risks.

If you fail to make a payment by the due date, the lender has every right to start the foreclosure proceedings. Many banks will allow you a "grace period," so as not to start any foreclosure process.

After a certain period of time, the lender will send you a certified letter stating that your loan is in default. Included will be any penalties and any unpaid mortgage totals. It is important that you contact the lender to try and work out a plan to pay the bank back.

Banks are not in the business of owning homes; banks are in the business of lending money. Banks do not want the house back! Contact them and try to work out an agreement to pay them back the unpaid payments.

Your loan will likely be reinstated if you bring the mortgage back to good standing if you pay back any outstanding mortgage payments and fees.

If the lender has given you the allotted time to make the loan current, and you cannot make the payments, the loan will still be considered in default and there will be a scheduled auction.

Following the auction, if there is any money still owed to the lender, the homeowner may be required to pay those debts owed. If there is money left over from the auction, that amount of money will go to the foreclosed homeowner, if all of the fees have been paid to the lender.

With any court foreclosures, the sheriff carries out the sale, which is about 45 days after the county clerk orders the sale. It is considered a public auction, thus anyone wishing to bid on the property, may do so.

Generally, the accepted bid must be paid to the sheriff no later than 5:00 P.M. on the day of or the day after the auction.

A certificate is issued following the foreclosure sale. If the property is not abandoned at the time of the sale up to the next six months, this is known as the redemption period. Some states will allow the borrower to redeem the property. Any secondary lender may redeem the property within a certain amount of time. In order to redeem the property, the total amount owed including any fees, must be paid.

If there isn't anyone who redeems the property, the sheriff will then transfer the ownership to the winning bidder at the time of the foreclosure auction.

With Out of Court Trustee Sales, notice of the sale is noted which includes the property description, date, time, place, etc. The auction notice is then recorded with the county.

The trustee mails the notice to all interested parties. This notice is sent out three months before the sale date and will be published in the local newspaper.

No less than 20 days before the sale, the foreclosure auction notice is posted on the property and the county courthouse.

The day before the sale is scheduled to take place and leading up to the sale, the trustee must provide the opening bid of the sale to anyone who inquires about the sale. If not, then the sale may have to be postponed.

Out of Court foreclosure sales require every bidder to provide a refundable $10,000 deposit in order to bid. The trustee keeps the deposit of the individual with the winning bid.

The winning bidder has until 5:00 P.M. by the next day to pay his/her bid price.

Following the sale, the trustee then transfers ownership of the foreclosed property within seven days. The proceeds of the sale are paid directly to the primary lender, then to any secondary lenders that exist.

There is no right of redemption following Out of Court foreclosure sales.

Bank foreclosures are at an all-time high. If you are an investor, your'e likely to find foreclosures all around the U.S.

Will foreclosures decline in numbers? Only time will tell.

This information is not considered legal advice to help you avoid losing your home. It is always recommended that you seek professional legal advice such as a local real estate attorney.

It starts with a few missed mortgage payments and now you are wallowing in your own fear and sweat, this is certainly not the most favorable position to be in! Every year thousands of people and homeowners fall into this trap where they hide behind closed doors hoping that the debt collectors would just go away. The truth is you can indeed make them go away- but only if you take decisive action as early as possible.

In fact, it's a tremendous travesty that all too many individuals in the end foreclose on their homes which could have been prevented if they owned up to the situation and took after through with some basic actions. Many of them simply sit on their hands and hope for a miracle. Although that might work in some cases, you still ought to give it a good ol college try- because at this point you've got nothing to lose for trying.

The first steps that anyone facing this difficult situation should do is contact their loaning bank or credit union to see what can be done. Here's a big secret for you, your debtors actually want to help you! They have a lot of things keeping them at bay with their work as it is and it's a huge hassle for them if you go into foreclosure- they'd much rather get you out of it. It's simply good business sense.

In many cases, especially if you catch onto the early stages of this process, your bank representative will offer help so that you can stave off foreclosure- by a long shot. Until this first step is done, do not work with private individuals claiming to be investors who want to get the multi family unit off your hands. Not all of these guys are charlatans, but if you do decide to work on selling off your home or negotiate a deal with a third party, it's advisable to have a knowledgeable real estate attorney with you during discussions.

Foreclosure is the new “F” word, carelessly tossed about as freely as recent job loss numbers. Foreclosure is ugly for the family with children losing their home. It’s ugly for the mortgage lenders not equipped to confront this uncontrollable epidemic. It’s damn ugly for the Realtors trying to help sellers in distress and buyers searching for a bargain.Ready or not, here we are and here we go.

Welcome to Real Estate 2008! For families in jeopardy of losing their homes, the only real alternative from foreclosure is to negotiate a short sale NOW…not later.

If you’re behind in payments and your mortgage lender (cannot) help you modify or work out your loan, immediately call a Realtors who *specializes* in short sales. Do it now. Do not wait for a better day, and do not call the greedy, unlicensed bastards masquerading as “foreclosure specialists” throwing their bandit signs up on every street corner and filling your newspapers with ads and your mailbox with touching stories wanting to help you.

Absolutely avoid theses wolves in sheep’s clothing.

Today was a really bad day. I failed to help a single mom with three kids avoid foreclosure. It was a painful experience for me. And of course it was painful for them.

As life often does, life threwTess M. of Orlando, Florida, a fully-loaded can of whoop-ass beginning with medical bills, job loss & divorce.

Which wound can you guess was the deepest? Tess and her husband could not ride out this financial storm…they separated and divorced, futher defining this American (family) Tragedy.

Never did Tess believe she’d lose her children’s father and her children’s home. Throughout, Tess attempted to protect her kids from this darkness, trying to maintain life as usual.

But the kids knew….as is the case, the kids always know when bad times hit home. They know. Tess knew that they knew, and that made all this malaise even more tragic.

Short Sale Succeeds But Fails

Let me stop for a moment. I want you to know upfront that I failed Tess and her children. I did not successfully negotiate a short sale. I failed to help Tess at least walk away with a decent credit rating.

I friggin’ failed to help them!

You see, Tess’ last payment was June '07. I came on board to short sell in November '07. She (and her soon-to-be ex-husband) owed $348,000 and the foreclosure cost the lender around ~$50,000 (9 months of no payments, holding costs, attorney/court fees, utilities, taxes, insurance, clean-up fees, etc) ......... $400,000.

I set the list price at $258,750 (I could justify it as well). Auction date was set for January 18, 2008...much quicker than I had thought. We had gotten over 50 showings. Not surprising...great area & "bargain" priced or so the bargain hunters thought.

To justify my list price, I spent hours compiling a market analysis for Nationstar Mortgage, the mega mortgage lender ouf of Texas. However, reaching a decision maker in Loss Mitigation proved extremely challenging.

...until I figured out the email nomenclature they use, e.g. John_Doe@mylender.k12.fl.us. I then researched the executive branch and began emailing them, telling them I had a full price offer on one of their pre-foreclosure (now an REO or real estate owned or bank-owned) properties.

I kept emailing.

The price was right for the house, the neighborhood & the local market. Finally, a VP of Loss Mitigation emailed me, apologizing and letting me know he personally was reviewing the offer and would get back with me. From around or above the mountain of files, he found his computer to email me.

I was impressed. I had to have been one of thousands calling and emailing, as more and more "bad" properties rolled in to Nationstar.

Suddenly, a flurry of activity...lots of different people from Nationstar swooned down on me with questions. I struggled to keep their names or titles straight, but they all were extremely helpful and wanting to get this done.

Note: As Realtors, we get insanelyvupset when it takes weeks and months to hear back from the Lender re: an offer on a pre- or foreclosed house. Our buyers get upset. Our sellers trying to save some shred of credit get upset. Everybody gets upset. However, from the mortgage lender's position, they are flat-out overwhelmed and clearly under-staffed. How could they not be under-staffed. Who anticipated this 100-year economic meltdown?

Appraiser Destroys Single Mom’s Hope

During the review process, progress ground to a halt. Suddenly, my first report requires a second report regarding the house, the neighborhood & the local market. The initial appraisal was grossly overvalued. I fought that appraiser's poor judgment with well-researched and accurate.

Was this mortgage lender, Nationstar, in denial about poor market conditions? I don’t know.

What I do know is that in my second report to Nationstar, I simply wanted to write, "Take my first report and think WORSE...now you have the state of the house, the neighborhood & the local market from my first report."

Two months go by and Nationstar continues to sit on a full-price offer from a strong buyer who’s putting down 60% cash.

BPO Rescues Sale For Buyer

The house, now bank-owned, gets a second appraisal, this time from a broker who performs what is called a BPO (broker price opinion) in late January ’08.

I kept emailing, always inserting factual information, never wanting to waste their time.

In the meantime, Tess and the children remain in the house...two full months after the auction. In fact, they just moved out last week to allow inspections to take place.

As a courtesy for leaving the house in "broom-clean" condition, Nationstar wisely provided the (previous) owner $500.00. What a SMART business decision!

The Fear Beyond Fear

You see, a lender's fear today (and rightfully so) is that a house in foreclosure will be destroyed and stripped. Yes, it's really happening…and it’s happening more often with each day.

I previewed a home last week for a lender and could not believe what I witnessed.....smashed windows....gutted kitchen (not one cabinet...not one appliance...not one countertop...not one light fixture...nothing!)...gutted bathrooms...thousands of holes in the drywall...holes in all ceilings...no carpet...busted tile!

Worse, the stench was unbearable...even from outside the house...the worst "sewer" odor you can imagine. Was it because all bathroom fixtures were gone? Was it the feces spread throughout the house....onto the walls as well?

I could not leave fast enough, and certainly photos did not do this "crime" scene justice.

Oh, by the way, this is a house in a $700,000 neighborhood...a so-called "exclusive" neighborhood. Was this vandalism? Or was this an angry owner who lost a house?

That's not my investigation or problem. However, here's a fact. Similar situations are happening...other Realtors report similar horror stories and not just in Florida.

Alleged angry home(owners) are destroying and stripping their homes before surrendering them, often forced by the Sheriff to leave. Vandals and vagrants are destroying and squatting.

And mortgage lenders must decide to fix the damage or sell "AS-Damaged" (not even the typical AS-IS).

What happens to a neighborhood shellacked by a couple foreclosures, sending values plummeting by 25-50%? Trailer homes to palatial estate homes, this epidemic is paralyzing Florida (perhaps the country?).

The Worst Is Yet To Come.

Mortgage lenders cannot hire enough loss mitigation staff. Out of necessity, mortgage lenders are telling homeowners in pre-foreclosures to list for 90 days (or longer) before even considering a short sale. Forget "deed-in-lieu-of-foreclosure" -- most lenders are not accepting properties "deed-in-lieu...."

What's the solution? Well, here's one, and I'm certain this proposal will stir the pot and get dismissed automatically as unfair, flippant and even impossible. Impossible? Impossible is what we're witnessing on Main Street and Wall Street. Flippant is believing this market with right itself. That's flippant and irresponsible.

Here's my common-sense approach, clearly lacking any formal finance or economics education:

Adjust mortgage payments and mortgage amounts to today's prices. Do it NOW! Instead of continued writedowns and economic meltdown, keep people in their homes. Give them a certificate for the difference between their mortgage amount and today's value (ex: they owe $348,000; today's value $268,000; certificate $80,000).

Insist they cannot sell for one year unless absolutely necessary. Hence, they receive a credit (certificate) of $80,000. If they sell four years from now and their home's value has recovered to $338,000, they receive $10,000 credit.

Is this fair? Of course it's not fair. Neither is the recession we're in that this country's "LEADERS" refuse to admit (not enough quarters of negative growth).

Ask any child not from some privileged family, and you’ll get the truth. That child will tell you, hopefully not using the “F” word, these are tough times and about to get tougher.

Success begins when you discover and understand the most important living person. That person is you! Being successful first starts with being happy with yourself. If you are not a happy person then odds are you will not be successful. Abraham Lincoln once said: “It has been my observation that people are about as happy as they make up there minds to be.” I have found that in order to be happy you must divert your energies to make somebody else happy. If you search for happiness, it will definitely elude you, but by trying to bring somebody else happiness it will find you many times over. Sharing happiness will attract happiness. The opposite is true as well. If you share unhappiness you will attract misery, despair and unhappiness. Happiness begins at home. Motivate your family and friends to be happy like a salesman motivates his prospects to buy.

Man’s greatest power is the power of prayer. Don’t blame God for your failures or lack of success but ask for guidance. All of us have been given special gifts needed to succeed and we must use them wisely. To become a great achiever you must practice continuously. Championship football teams don’t become great because of gifted athletes alone, but because of practice ..... practice ..... practice. We all have special gifts that have been given to us but we must practice on how we use them. Always seek guidance and don’t underestimate the power of prayer. We must stay in contact with our most senior partner and coach.

Success is a repetitious activity. Use ideas and circumstances that have proven successful for others. For example, Orville and Wilbur Wright did not discover the theory of flight they just used and tweaked others’ ideas until they succeeded. They failed many times before they got off the ground. Remember when you use somebody else’s idea it becomes your idea for your use. Don’t be frightened to emulate others’ successes.

Success is not more than establishing the correct frame of mind; in other words, a positive mental attitude. Have established goals set and inscribed in your mind. Write those goals down, this will enable your mind to grasp and remember them. Always give yourself a deadline when you want to accomplish them. Have intermediate milestones in reaching each goal. Specify the time frame. Always set your standards and goals high. The higher you set your major goal the more determined and focused you will be in reaching at least the intermediate objective. Always aim high. Whether you are working for somebody else, starting your own online business or beginning a new career, it is too easy to accept poverty and mediocrity. Demand abundance and prosperity. The most important person in your life, YOU, deserve it.

All the wealth and success in the world cannot buy good health. Again, you are the most important person so be sure you take care of yourself. If you have health problems you become worried about every ache and pain and your positive mental attitude suffers. Poor health can undermine a successful attitude. Exercise, eat nutritiously, maintain a healthy body weight and see your doctor on a routine basis.

Now is the time to take action. Take the first step to success. Success is a frame of mind. If you truly want to succeed you will. We don’t fail intentionally we fail in planning to succeed. Recognize God’s special gifts and who the most important individual is in your life. You owe it yourself to be happy because happy people are successful people. Unhappy people will eventually drown in their own self-pity and sorrow and always fail. They tend to drag everybody around them down. Unhappiness is a negative attitude. Always find a positive and never dwell on negative. Establish your goals and aim high. See you in the winner’s circle!

An "upside down" property is when the money owed (mortgage) is greater than the fair market value (FMV) of the home. For example, if the FMV of the home is $250,000 and the amount owed is $275,000, the property is upside down.

This situation generally happens when there is a real estate market decline, the homeowner refinances more than 100% of FMV, or an equity line is added that is close to or above the FMV. In some areas of the country where there have been substantial market decreases, these same markets are retracting and leaving the latest home buyers, or buyers who refinanced, with upside down mortgages. Refinancing and allowing the property to go into foreclosure is getting to be a very common practice within the past few years.

When the homeowner is late on his mortgage for 30 days, he gets a Notice of Default ("NOD") and continues to receive these NOD's every thirty days until the loan is closed out by reinstatement or foreclosure. A little known fact is that lists of NOD's are sold to mortgage brokers and anyone who will pay a few cents per name. These list buyers know that if the homeowner becomes a NOD, he is likely to become a foreclosure candidate shortly.

Whether the lenders and the credit bureaus both get paid for these names is uncertain, but list brokers re-sell these lists many times over. If you have ever been late by 30 days on a credit card or mortgage payment, you may have noticed that you start getting "refinance" or "you are pre-qualified" loan offers. This is because the lenders of high risk loans are buying the NOD list and sending you financing offers. Investors use the NOD lists knowing that once a homeowner is 60 - 90 days late on his mortgage, he is usually headed to foreclosure and 80% of the time, the loss of his home. If you are an investor reading this and buying these leads, unless your list vendor can sort the 30 and 60 days leads out, get another list vendor who is one of the original buyers of this information. It will cost you a little more per name, but the difference is not significant.

The real question is what options does the homeowner have for his upside down property?

1.)The homeowner can continue paying his mortgage with his only benefit being the tax deduction for his interest and his credit remaining in tact. Each payment is lost equity and can only be justified as a rent payment in his mind.

2.)The homeowner can stop making his mortgage payment, go into foreclosure and lose his home and tarnish his credit for years to come. However, he always has the option of moving on to another home using a "no credit" purchase program to buy his new home.

3.)He can ask his lender to do a loan modification to reduce his mortgage payments by extending them out 10 years, find a buyer for a short sale, request a deed in lieu of foreclosure or simply walk away from his home and let the lender repossess it by foreclosure, essentially the same result as "2.) above.

So as you can see, the homeowner has few choices to "stop his bleeding"
as it is known in the industry. This is the hidden foreclosure market that is just beginning to become obvious. Many homeowners with second homes or investment properties are making the choice to walk away and take their chance with credit repair later. However, the most objectionable consequence is the potential for a deficiency judgment by the lender for the deficit that wasn't paid on the mortgage. The lender has the option to pursue a deficiency judgment or issue and IRS Form 1099 which gives the homeowner "phantom income" in the amount of the mortgage deficiency, which is a far better option that carrying a deficiency judgment on his credit report. Take these consequences into consideration if you have to make the judgment of whether to stay or leave your home behind.

About Author:
Dave Dinkel is the author of "32 Ways to Quickly Stop Foreclosure" and has helped thousands of foreclosure victims for nearly 33 years. If you are facing foreclosure, visit StopMyForeclosureMess.com for guaranteed solutions.

Possibly one of the best kept secrets in the foreclosure industry is "overage". Overage is the amount of money left over after a foreclosure auction when the buyer has paid more than the lender"s final judgment. This money can be as little as a few dollars or as much as millions of dollars.

Depending on which state the homeowner lives in, his foreclosure sale will be conducted by a sheriff, a trustee, or a county clerk of the court. As prescribed by law, the person in charge of the auction will sell the property to the public with "open outcry bidding" until the property is sold or redeemed by the lender. The location is usually on the courthouse steps or similar convenient place that is readily accessible to the public.

Normally the first bid on a property is by the primary lender who bids his final judgment amount as awarded by the county court plus $100. The next bid will come from an interested party to the property such as a junior lien holder or an investor who believes there is equity in the property. These bids will continue until the last bid, which wins the property.

Let's assume the final judgment on a property is $100,000 and the bank bids $100,100 and some bystanders start bidding until the final bid is $120,000. The lender submits his final judgment documents to the county clerk and the winning bidder must bring in cash anywhere from the same day to 30 days later, depending on state and county laws. Once the funds are in the courthouse and any redemption period has passed the lender gets his $100,000 and the buyer gets a deed to his property. A redemption period is a specific period of time from 1 day to 454 days, where the foreclosed homeowner can return with money to get his property back if he pays the buyer his costs plus fees and expenses. In some states there is no redemption period.

The clerk of the court has taken in $120,000 plus some transfer fees and paid out $100,000 and has a $20,000 credit in his bank account. The homeowner is entitled to this "overage" money. The homeowner has to make a claim to the county clerk and the court usually reviews these claims and awards the homeowner his money. This is an ideal world scenario, but in the real world, the homeowner may not know he has money coming to him and these funds eventually become the county's money.

Here is what has happened - a homeowner is approached by a person one or two days before the foreclosure sale and is offered $100 for a deed to his home. If the homeowner knows he can't stop his foreclosure sale and redemption is not possible, he views the $100 as free money. The buyer pays $100 and proceeds to go to the auction and perhaps even puts in a bid or two to get the price higher. If he won by accident, he can renege on the bid and it reverts to the last bidder. Let's look at the above example where the overage was $20,000, which is a very common amount. The "new" homeowner makes claim to the court and his $100 investment becomes $20,000.

This practice was and is very common in good real estate markets and where the state hasn't passed legislation to stop this practice. It is not illegal in many states and even in the ones where it is illegal, the states allow some form of "commission" or fee to be paid to a person who brings in the seller to reclaim his overage. At one courthouse I frequent for auctions, there is a group of 4 - 6 individuals gathering the data from the clerk's sales to use for later sending out letters to sellers to claim their overage. The usual fee is 10% of the total amount and can be very lucrative because the average overage is about $21,800.

What does this mean to a homeowner in foreclosure? It means that despite what you may think your home is worth, it could be sold at auction for more than is owed to his former lender and he is entitled to whatever money is remaining - the overage. So don't sell what you think is a worthless deed because on average it could be worth over $20,000.

Occasionally, the lender will get a final judgment against a homeowner by appraisal and not by sale because this is allowed in some states. The homeowner should always challenge this appraisal and have the judgment reduced if the property sells for more than the final judgment amount later. The moral to this story is that even in the worst of foreclosure situations, the loss of your home, the homeowner still has a chance to make money.