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

In Washington, when a homeowner goes into foreclosure, the homeowner stands to lose any equity that has been accrued in the home. Equity is the difference between the market value of the home and the remaining balance of the mortgage. When a homeowner goes into foreclosure, the process begins when the lender files a Notice of Default, which is the recorded notice that the homeowner has not been making their payments and the lender is taking possession of the property. This notice also starts the foreclosure process. The foreclosure process can take some time, depending on the nature of the foreclosure, and the homeowner will have the opportunity to pay off their mortgage to avoid the foreclosure process. However, if they are unable to do so, they will lose any equity they have accumulated in their home. At the end of the foreclosure process, the property will be sold at a foreclosure auction. If the house is sold for more than the remaining mortgage balance, the homeowner will retain the difference (up to the amount of their equity). If the house is sold for less than the remaining mortgage balance, the homeowner will lose any accrued equity as the lender will not make up the difference. In either case, the homeowner will need to vacate the property following the foreclosure sale, so it is important for the homeowner to be aware of their rights and responsibilities under Washington’s foreclosure law.

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

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