If the apparent market value of the investment property is above the mortgage balance and a foreclosure occurs, it is clear that the legal expenses and late fees are something that the mortgagee must pay out of any money from the sale after the mortgage balance is paid in full.
The normal closing costs and capital gain taxes are not a concern for this question because they would have occurred with a normal sale too.
It also seems to me that the financial institution will not be highly motivated to get the best price for the mortgagee, so that is probably a loss resulting from the foreclosure too. So here is the list of losses I see so far.
- Late fees and penalties
- Legal costs incurred by the financial institution
- Any legal costs incurred in defending the foreclosure
- Loss resulting from the financial institutions lack of motive to get fair price in the sale
Are there any other losses that can be expected beyond the above?
Also, are there any statutes or pressures to motivate the financial institution to get fair price when the property is sold?