It depends on the situation and the likelihood that they can win back the amount owed on the property. Mortgage lenders won't always file for a deficiency judgment in a foreclosure case. And if the homeowner is unable to afford payments, the foreclosure could eventually lead to a financial situation where bankruptcy - with its significant credit implications for the borrower and costs for the lenders - is the only option. Add in the additional costs that can accumulate throughout the sometimes lengthy foreclosure process, which could be just the tip of a burdensome financial iceberg. The average legal cost to a homeowner going through a foreclosure is around $7,500, according to the U.S. Foreclosed homes are less likely to be maintained and more likely to remain on the market for an excessive period of time, and they make it difficult for homeowners with good credit to upgrade into more expensive homes. A 2010 report by the Federal Reserve Bank of Cleveland estimated that a foreclosed home not only dropped in value, but caused homes within a 260-foot radius to lose up to 1 percent of their value, as well. The housing market also suffers from foreclosure, due to decreased home values. ![]() Banks nearly always lose money on foreclosures between the lower sale price they receive at auction and the resources they must assign to administer the foreclosure process, it's rare for them to come out ahead at the end of a foreclosure. This can essentially remove the former homeowner from the pool of large-purchase consumers, a key part of the nation's economic engine, for years. The homeowner receives a mark on his or her credit that can make it difficult - sometimes impossible - to borrow money for another home, car or major purchase. A foreclosure on a home adversely affects the homeowner in a number of ways, and it also has a negative effect on the lender and the housing market in general.
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