What happens to the homeowner's equity in a foreclosure?

In Massachusetts, if a homeowner fails to make their monthly payments and goes through foreclosure, they risk losing their equity in the property. Equity is the difference between the value of the property and the amount of money still owed on it. If the lender chooses to foreclose on the property, they will take possession of it. Depending on the value of the property and the amount of money still owed on it, the lender may have to go through a foreclosure auction or a judicial sale. During the auction or sale, the lender will attempt to sell the property to cover their losses. If the asset is sold for more than the amount of money still owed on it, the difference between the sale price and the loan balance is referred to as the “surplus” and it is the homeowner’s equity. The homeowner may be able to get some or all of the surplus money, depending on whether it has been claimed by other creditors. In addition, the homeowner may be able to sell their equity prior to the foreclosure and use it to pay off the debt. However, if the homeowner is unable to claim the surplus money or sell their equity, they will lose it when the foreclosure process is complete.

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What happens to the homeowner's equity in a foreclosure?

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