How does the sale process work in a foreclosure?

[ssmdem]

How does the foreclosure process work as far as the sale of the house and transferring the title? We owe $350K on a house that's worth maybe $315 AT BEST, probably closer to $300K. Our payments are WAY more than we can handle now with our job situation - almost twice what we can afford. We will be missing our first payment next month, so we are at the very beginning stages of this. We are going to try for a modification once we're behind a few months, but assuming that doesn't work out and we go into the foreclosure process. NOTE, we will be filing bankruptcy more than likely in the middle of the process as well and surrendering the home if the modification doesn't work out.

What I'm wondering -- once it gets to the sale process, how does this work? If I know of an interested party who is willing to buy the house and then let us stay here and rent to them until we are able to buy it back from them -- what price are they looking at? Obviously no one is going to pay more than its worth, but what kind of price are they reasonably looking at?

[good2free]

Generally in a foreclosure auction the initial price is the first loan balance. Bidding process starts from that number.

In some cases (may be 5%), the lenders reduce the price below the first mortgage amount. In this case one can expect some bidding. A friend of mine buys this kind of houses, fixes them and sells them for the market price. He is doing really well these days.

[ssmdem]

Well, in our situation, the 1st mortage (the only mortage on it) is more than it's worth. What do they do in those situations?

[HHM]

Generally, the auction price will be at least 75% of the 1st mortgage or the equivalent of the 1s mortgage depending on the state. Most houses are not actually bought at auction. the bank simply takes the house in on inventory and turns it over to a Realtor to sell.

[ssmdem]

Hmm, probably not a feasible option then. Oh well - keep trying to brainstorm a way to keep this place, but I guess it's just not in the cards.

[ssmdem]

Another question -- so the 3 year time clock for being able to get another mortgage wouldn't start though until the bank sells the property, right?

[gregp]

I don't get it.
I only have 1 loan, balance is about 266k. House is going to be foreclosed and starting bidding price is 281k! This could be the balance plus missed payments and various fees...
But how can they expect to sell it this price?!
I tried a short sale at 264k and didn't work!!!
Crazy...

[HHM]

The auction in most states is largely meaningless, the bank simply bids for the total amount owed (balance, arrears, legal fees, etc). Once the foreclosure occurs, the house is listed on the market for sale. The bank will take a loss.

The 3 year clock runs from the sale date (when the name on the deed is changed).

[gregp]

What can happen next?
I guess it will be REO, then bank will sell it. Can they sell at any price? Can they make make a deficiency judgement if they sell for less?
When do we know it's over?