For homeowners who are facing the prospect of foreclosure, the thought can be a scary one. In addition to losing your home, your credit rating will take a substantial hit which makes it tougher to secure the mortgage for your next home.
What makes the process of foreclosure worse is the seeming inevitability once you realize that making the next payment is not going to happen. Whether the situation is a temporary one of having to pay an unexpected medical bill or if you should lose your job, once the pattern of missing payments begins it seems that the process will eventually lead to foreclosure.
The act of foreclosure is not an inevitable one as many homeowners facing that situation might believe. This is because there are actions you can take to help halt the process of a foreclosure sale even if you do not have the money to make the payments. The key is to act as soon as possible so that you can address the situation as long before the foreclosure sale as possible.
Five Ways to Stop Foreclosure
Obviously, the sooner you start the better. You will want to look over your mortgage and the agreement made with the lenders. You may find that there are clauses or circumstances where you can miss a payment without penalty. In addition, you will need to assess your own situation in terms of whether missing payments is a temporary or permanent issue.
Here are five methods that can help you avoid a foreclosure sale. You should take a little time to assess your situation to know where you stand and what can be done before going to the first step.
Negotiate: What is true is that most lenders do not want foreclosure if they can avoid it. To foreclose on a home most likely means falling short on the payments that were expected on the loan. Plus, they must get the property back into shape and sell it all over again. From the perspective of the lender, they will want to work with the homeowner if they are having trouble with paying on the mortgage.
You should talk to the lender as soon as possible, preferably before you miss your first payment. This gives you additional negotiating power because you have yet to miss a payment. However, compromising with the lender can work even after you have missed making the premiums on the mortgage.
Short Sale: If your lender files an NOD which is a notice that a sale in impending, you can still avoid a foreclosure through the avenue of the short sale. A short sale occurs when an offer is made for less than the amount the current owner owes the mortgage company. By law, the lender must at least consider the buyer’s offer for the home.
Depending on the size of the offer, the lender may go ahead and agree to the short sale. This is because many lenders will see a short sale as saving them time, energy, and money compared to completing the foreclosure process. The closer the offer is to the amount remaining on the mortgage, the more likely the lender will consider the short sale option.
The seller is not allowed to financially benefit from the transaction. For a short sale scenario, it is better to utilize the services of an experienced short sale Realtor or real estate investor. Most lenders require the house to be listed with a Realtor before they will consider a short sale offer.
Keep in mind that if your home is worth more than what you owe then a short sale is virtually impossible.
Filing for Bankruptcy: If your lender does not or cannot negotiate and a short sale is not possible, filing for bankruptcy will stop the foreclosure sale cold. This is because federal law will prevent the lender from continuing with the sale. This is because foreclosure is considered part of the collection activities from a lender that bankruptcy prevents.
However, filing for bankruptcy is not a solution, but rather a way to buy time because it freezes the process in place. This is a good solution for those who are facing a temporary situation that is preventing them from paying their bills such as a loss of a job or being disabled in an accident. However, once the negotiating process starts in bankruptcy you will commit to a repayment plan. It pays to hire an attorney who specializes in bankruptcy to find all the options and represent you in the negotiating process.
Also, keep in mind, you will have a bankruptcy and on your credit history for the next 7-10 years. Plus, you may still be required to work out a repayment plan for the house.
Turning the Property Back to the Lender: This process is called a “deed in lieu” and on the surface, seems like a good option. The homeowner simply signs the property back to the bank or lender on a voluntary basis. However, this method virtually never works because lenders are extremely reluctant to take a home back under these conditions. There are several reasons why which includes the following;
- Lender must pay off any additional mortgages
- Lender may not believe the financial status of the homeowner
- The homeowner may sue for misunderstanding the agreement
In the cases in which a deed in lieu was granted, it occurred when foreclosure was about to happen after the property had been on the market for a considerable period. Plus, there were no additional mortgages attached to the property and the homeowner suggested the deed in lieu so no misunderstanding could take place.
Sell your house before the auction: If you decide to sell your house before the auction date, you will be able to keep at least some of the equity you may have built up in your home. Selling your house fast for “all cash” to a credible and reputable real estate investor can help you save your credit and solve your foreclosure concerns. Keep in mind that you will lose all of your equity if your house is sold at auction and your credit will be severely impacted.
If there isn’t enough equity for a cash sale, you may still be able to take advantage of other non-traditional methods of sale. Selling your house “Subject-To the Existing Financing”, also known as Owner Financing, is one example of a non-traditional sale. The real estate investor who assists with this option will catch up your payments and continue to pay the existing mortgage and all associated bills with the house until it is paid off. There are many benefits which include avoiding foreclosure and saving your credit. In many cases, you credit will actually improve because it is the responsibility of the investor to always keep payments current which reflects well on your credit report. We recommend that you contact a real estate attorney for any advice that may answer any of your questions.
Time is money and it is not on your side when you are facing foreclosure. Get Started now or you may also give us a call. We are always available to assist!
Disclaimer: This information should not be considered legal or financial advice. You should consult with an Attorney or financial professional to determine what may be best for your individual situation.