If my home goes into foreclosure, can they take a new home that I buy?

I agree with both of my colleagues. However, I have to agree with Margery Ellen Golant as to the homestead issue.

If the subsequent property that you purchase becomes your principal residence, then any deficiency judgment against you can't be collected from that property. In other words, it will not become a lien against that property as long as it remains your homestead without interruption.

However, and here I agree with Lori I Barkus in that, if the property ever ceases to be your homestead (your principal residence), then the judgment attaches automatically as a lien.

But let me add a couple of practical pointers:

Pointer 1- Assume that the bank obtains a deficiency judgment, which is a judgment for the difference between what your property brought at the foreclosure sale and the amount of the judgment - which presumes that you owe the bank more than the property is worth. Even if it never becomes a lien against the subsequent property, it will always show up in your credit report as a judgment for X amount against you. Therefore, if you finance the purchase of your new home/condo, your new lender will more than likely require you to pay off that judgment before closing.

On the other hand, if you are lucky enough to close on the new purchase but later wish to refinance, your new lender will require that you file a special type pf lawsuit to obtain a judicial determination that the property is your homestead and therefore, the judgment is not a lien.

Pointer 2 - Many lenders (at least here in Florida) are making noises that they will not seek a deficiency judgment but, instead, will issue the homeowner an IRS-1099 showing the amount of the deficiency. Under existing federal law, the homeowner is required to show that 1099 in his/her income tax return but will not be required to pay income tax.

HOWEVER, WARNING, BE ADVISED: Under the present backlog in the courts here in Florida and considering that its taking many lenders who end up with properties as a result of a foreclosure as long as a year to sell the property, only future history will tell us what the lenders will do: Issue 1099s, or obtain deficiency judgments. In addition, a deficiency judgment is not something that is automatically given to the lender. There are procedural and evidentiary requirements that the lender must follow to be entitled to a deficiency judgment

Hope this adds to the previous answers.

Regards,

David

David A. Donet, Esq.
Miami, Florida