What Happens After Foreclosure? A Deep Dive 

Once the foreclosure process is triggered, it is challenging to stop the process. It is important to begin looking for an option right away because there may be a few things you can do to avoid foreclosure

The period after a foreclosure sale can be hectic and stressful. In most cases, you would be required to leave the premises within an established period of time. However, you might still have a chance to stay in your home after a foreclosure depending on your state’s laws. Each state has established laws and rules for proceeding during and after a foreclosure. 

It might be challenging, but it’s possible for you to reclaim your foreclosed property even after the process has been completed. 

What Is the Foreclosure Process? 

Foreclosure is the name for whenever a mortgage lender attempts to seize the property as a penalty for defaulting on mortgage loans. As each stage of a foreclosure continues, it will become even more difficult for the purchaser to stop it. It’s best to take steps to avoid triggering the foreclosure as soon as possible. 

The exact steps on a foreclosure will vary based on two factors: the specific laws of the state and the type of foreclosure that’s being pursued. Find your state’s exact location policies for the most accurate guidance.

Judicial Foreclosures 

These foreclosures are the most commonly sought-after type of foreclosure by lenders in the United States. Judicial foreclosures are not only legal in all 50 states, but almost half of them specifically require them. 

The exact process of a judicial foreclosure will differ based on state laws, but will generally follow these distinct stages

  • The Mortgage Is in Default. A mortgage is in default once a mortgage payment is missed. Most lenders allow a grace period for their borrowers to make their payment, but the foreclosure clock starts ticking on day one. Over the next few weeks, lenders will ramp up their efforts to contact the borrower and inform them of the delinquent payment. It’s common for a borrower to start receiving phone calls and demand letters from the lender.
  • Notice of Default Is Sent. After the fourth missed payment (90 days after the first missed payment), the lender will usually send a notice of default. The borrower will now have 30 days to settle their payments along with any late fees or additional charges. Federal law prevents lenders from taking any judicial actions until at least 120 days after the date of the first missed payment. 
  • A Lawsuit Is Filed. When the lender has waited the necessary amount of time and still hasn’t received payment, they will then file a lawsuit with the local courts. The borrower is served with a complaint and can contest the suit with an attorney.
  • The Case Is Heard. The courthouse will review the case’s evidence and rule on allowing the foreclosure to continue. If the courts rule in favor of the lender, they will enter a judgment ordering the sale of the property to satisfy the outstanding debt. The court will set a date, time, and location for a public auction (normally within a few months), and the lender will be required to advertise the event publicly. 
  • The Auction Takes Place. The lender will calculate a minimum bid for the auction that will take into account the value of the property, the total remaining amount on the mortgage, and the various charges and costs of the foreclosure process up to this point. The property will be sold to the highest bidder, and the court will transfer legal ownership to them within a set amount of time. If the property is not sold, the lender will take ownership and may attempt to sell the property privately.

Non-Judicial Foreclosures 

There are a few different types of non-judicial foreclosures in real estate, but the most common is known as a “power of sale” foreclosure. These foreclosures are only legal in a little over half of the states in America. 

For a power of sale foreclosure to legally be pursued, the mortgage agreement must include a power of sale clause. If the borrower agrees to this clause, then the lender will have the legal right to seize the property and try to sell it in the event of a defaulted loan. A power of sale foreclosure will generally move much faster than a judicial foreclosure because the courts won’t need to be involved. 

The stages of a power of sale are essentially the same as a judicial foreclosure. The key difference is that after the 120 day period has expired, the lender or mortgage company will only need to provide notice of the impending foreclosure and possibly file it with the local clerk. There will be no need for a court order or permission to move forward with the foreclosure proceedings. A trustee will then attempt to sell the property at a public auction that will resemble a judicial foreclosure. 

What Happens After the Foreclosure Process Is Completed? 

A majority of states grant borrowers the opportunity to settle their missed mortgage payments up to the start of the foreclosure auction. If the outstanding debts are paid, the auction will be canceled, and the borrower will be permitted to stay in their home. Once the auction has ended (whether or not a sale has been made), these protections quickly start to fade. 

Each state is different with its exact process for handling a foreclosure’s aftermath, and some offer up more options than others. These are a few possible scenarios that a borrower might experience after their home has been foreclosed. 

Redemption Period 

After a home has been sold at auction, some states provide a set amount of time where the original borrower could still reclaim their home. This amount of time is known as the redemption period and is permitted in just under half of all states. During a redemption period, the foreclosed borrower will be given the opportunity to either the lesser of two sums:

  • The total remaining debt of the mortgage plus any late fees or interest penalties and the costs incurred by the lender during the foreclosure process. 
  • The total amount that the highest bidder paid for the home during the auction plus any property taxes, interest, or HOA fees.

The exact rules of a redemption period will vary depending on the state and whether or not the foreclosure was judicial or non-judicial. In some states, the redemption period may only last until the property deed is signed over to the new owner. For others, it can last as long as a year after the foreclosure auction date. 

A borrower can forfeit their right to a redemption period if the property is considered abandoned or they waive their right in the original mortgage agreement. There are no federal laws or guidelines for redemption periods for defaulted mortgage payments. The IRS does offer a redemption period of at least 120 days for properties that were foreclosed due to unpaid taxes. For all other foreclosures, the discretion is primarily left up to the individual states. 


A majority of states don’t allow for redemption periods and will begin the process of eviction as soon as the foreclosure auction has concluded. Eviction is the court-ordered removal of the current tenants residing on a property. 

After the property sale is finalized, there will usually be a period given to the foreclosed borrower to vacate the premises. The exact amount of time will vary depending on the state and specified ruling of the court during foreclosure proceedings. 

It’s very common during this period of time for new owners of the property to make “cash-for-keys” offers to foreclosed tenants. These offers will usually include hundreds or thousands of dollars in return for a quick exit and leaving the property in good condition. These offers are generally beneficial for both parties as the former owners will receive much-needed cash, and the new owners will avoid court costs and damaged homes. The new owners are not required to make these offers and can simply decide to wait out the tenant or speed up the eviction process with a lawsuit.

Evictions will normally be scheduled for three days after the occupant has been served with a notice to vacate. The final stage occurs when the court issues a writ of possession and the local sheriff posts a 24-hour warning on the property for the occupants to leave. If the property isn’t vacated within 24 hours, the sheriff and constables will enter the property and physically remove all occupants and their personal belongings. 

Deficiency Judgment 

In the event of a non-judicial foreclosure, the lender might attempt to obtain a deficiency judgment. Most of the time, the sale price of a foreclosed property during an auction will be less than the total debt owed on a mortgage. The difference between these two sums is known as a “deficiency.” A deficiency judgment is a court ruling that would require the lender to pay the deficiency to the borrower. Most deficiency judgment rulings will grant the borrower a period of two years to repay the deficiency sum, but it might vary depending on the state. 

The total debt owed on a mortgage will factor in the existing principal plus potential interest accrued during the remaining years of the term. It will also include late fees for missed mortgage payments and any costs ensuing from the foreclosure proceedings. The property’s final sale price at an auction will be subtracted from the total debt owed on the mortgage, and the foreclosed borrower might be liable. 

If lenders do not believe that the borrower will pay off the deficiency, they might seek permission to “write off” the loan and cancel the debt. The borrower would no longer be obligated to pay the deficiency, but the IRS would consider this sum to be taxable income. In this event, the borrower would have to pay additional taxes when filing their return to cover the taxes stemming from the forgiven debt.

The Takeaway 

There are several very different scenarios possible for the aftermath of a foreclosure. The state that you live in and the type of foreclosure will play a significant role in determining your options after the sale of the property has concluded. 

In most cases, you would be given a set period of time to vacate, or else the sheriff’s department will evict you from the property. Some states may allow you to stay in the home during the redemption period, but these rulings are typically pretty rare. Even after moving out of the foreclosed home, some states might rule that you are liable for the mortgage debt and property sale deficiency. 

It’s best to avoid foreclosure proceedings at all costs. If you have difficulty keeping up with mortgage payments, get a free proposal from Balance Homes today. You might be able to avoid foreclosure, stay in your home, and improve your financial profile or credit score at the same time. 


Power of Sale Definition | Investopedia

Redemption | US Department of Housing and Urban Development

The 6 Phases of Foreclosure | Investopedia

5.12.5 Redemptions | Internal Revenue Service

Foreclosure Definition | Investopedia

Deficiency Judgment | Cornell Law

Eviction Definition | Investopedia