Foreclosure is a long-winded process, sometimes taking years to complete. It typically occurs when the homeowner fails to complete the payment for the house, prompting the bank or lender to begin the process of collection. If the payment is not made, the bank to whom the trust deed or mortgage is owed will seize the home. Very few homeowners voluntarily go into foreclosure because it is often the result of unpredictable circumstances, such as the loss of a job, a divorce, excessive debt, expensive medical problems, or an out-of-state move. Often, it is a question of affordability and convenience on the homeowner’s part.
While economic issues may be unavoidable in certain circumstances, it is possible to avoid a foreclosure. For homeowners who wish to recoup their expenses, there are ways to prevent the loss of a home from resulting in a significant damage to your finances. Fortunately, there are ways to prevent a foreclosure. Here are the steps how:
Build Your Case.
Gather all documents and records pertaining to the house and mortgage, such as loan documents, property tax records, home insurance records, letters, and promissory notes. Getting organized is a good first step to determine your standing as a borrower. It will also help you build a case for negotiating in your favor, such as for a loan restructuring or a forbearance.
What to expect: The initial stage following failure to make mortgage payments is critical in determining whether or not a homeowner can negotiate with the lender. All loan documents must be organized at this point to help the homeowner understand his status and determine how strong a case he has.
Determine Your Legal Rights.
Your mortgage agreement will spell out important legal matters about your rights as a homeowner or borrower. If payment is overdue or if you have already actually failed to pay, review all loan documents for important information such as late fees and other charges and the possibility of a loan reinstatement.
What to expect: Most mortgage loan agreements prevents a lender from starting a foreclosure until after the borrower has failed to pay after 120 days. By this time, the homeowner may start building his case to help him begin the negotiation process with the lender.
Talk to the Lender.
By the time a homeowner has failed to make three payments on the mortgage, the process of collection will have begun. Often, a NOD or Notice of Default will be filed by the lender. During this time, it is important for the homeowner to begin the negotiations with the bank to try to come up with a compromise that will allow the homeowner to keep the home and continue with the mortgage payments.
What you can expect: Most lenders are more than happy to assist homeowners where foreclosure is a looming problem and they may have options that will help you keep your home. Lenders usually prefer not to go through a foreclosure because taking back your home means taking responsibility for every financial aspect associated with that structure. These will include property taxes, maintenance and upkeep, and payment loss on the property. As such, you may have a good chance at restructuring your loan and keeping your home.
Negotiating with the lender can help you avoid losing your home. If you qualify, the lender may offer to restructure to allow you to make affordable monthly payments. Loan restructuring not only helps make your monthly obligations easier to meet, they will also help you pay back missed payments eventually. If you qualify, your lender may even offer a reduced interest rate.
Another possible solution that the lender may agree to is a forbearance. Qualified homeowners may be allowed to pay back their monthly mortgage at reduced amounts, or the lender may suspend the payments altogether for a limited period of time. This is a common solution for homeowners who are undergoing a temporary financial difficulty, such as those who are waiting for a new employment or those who have missed payment due to an illness or injury.
What to expect: Temporary solutions such as a loan restructure or a forbearance have considerations and guidelines that homeowners need to meet to qualify. These agreements are typically covered by a contract and as such, are considered legally binding. As long as the borrower can prove that his current financial situation will improve, the lender is more likely to offer a temporary respite from payments.
Get the Court Involved.
In cases where no financial assistance may be expected, filing for Chapter 13 bankruptcy may be a good option. The bankruptcy court may offer assistance in restructuring your loan, allowing you to obtain an affordable payment plan. This plan will help you meet your loan obligations (along with other debts) and may even prevent you from losing your home.
What to expect: Foreclosed properties may be sold by the lender at a price lower than the outstanding loan amount. In some states, borrowers are protected against paying for the deficiency. However, some states allow lenders to go after the borrower to recover the deficiency through a lawsuit. Filing for bankruptcy after the lender attempts to collect the deficiency will result in a discharge of that deficiency.
If, however, the lender has agreed to wipe out the deficiency prior to the homeowner’s filing for bankruptcy, and the homeowner does not qualify for exceptions, the homeowner may still owe taxes on the deficiency amount should he file for bankruptcy afterward. Filing for bankruptcy before the foreclosure will also help wipe out the mortgage debt. The lien, however, will remain, which means that the property will still be foreclosed by the lender.
Sell on Your Own.
A short sale may allow you to avoid a foreclosure and pay off your debt. A short sale is an excellent solution wherein the net proceeds from the sale of a home about to be foreclosed may be used to pay off the Lien holder or lender. However, the amount of the sale will be either equal to or lower than the Appraised Value of the property. The lender must also agree to the sale amount to accept it as full payment of the homeowner’s debt.
Although a short sale can still put a dent in the homeowner’s credit report, he can avoid legal judgment associated with a foreclosure. The key is to ensure that the lender agrees to the proposal in writing. Otherwise, the lender may refuse the offer and the homeowner may still lose the house.
What to expect: Assistance from an experienced professional in short sales could prove advantageous to the homeowner, particularly since the sale price will be lower than the Appraised Value of the house. The lender is not obliged to accept the Appraised Value of the property and may require a higher selling price. However, if negotiations are successful, the short sale should proceed without any issue.
Sell Through a Realtor.
Selling a home through a real estate agent may be the best option for homeowners who are about to foreclose on their homes, particularly if there is a need to convert the home within a short period of time. Real estate agents can assist in a fair appraisal of the property to determine its market worth. They can also perform an analysis of the market to establish the potential selling price of the home. This figure may then be used to decide if the selling price is sufficient for paying off the debt. Furthermore, real estate agents can help negotiate the debt amount with lenders, particularly for homeowners eyeing a short sale.
What to expect: Experience trumps intent in the case of a realtor managing the sale of a property that is about to be foreclosed. Realtors can help sell a property more quickly and as the homeowner’s representative, they can help identify requirements that the homeowner might have to comply with. Some listings may have more issues than others and realtors can provide advice if legal assistance is necessary.
Give Up the Home.
A deed in lieu of foreclosure allows a homeowner to surrender the title of the property voluntarily to the lender. The lender will then offer to discharge the debt. While this step means that the homeowner will give up the home, he will also avoid a foreclosure.
What to expect: Like most transactions regarding debt, a deed in lieu of foreclosure requires an application and documentation, such as proof of income, tax returns records, bank statements, detailed financial statements, and a hardship affidavit. Some lenders will also require that the homeowner try to offer the home for sale before accepting an application for a deed in lieu of foreclosure. In some states, the lender may be allowed to pursue a deficiency judgment in an attempt to reclaim their money but if the homeowner can obtain an express agreement from the lender stating that the deed in lieu transaction fully satisfies the debt, a deficiency judgment may be avoided.
Sell to Us.
EveryHomeBuyer.com employs a team of experienced home buyers to help you avoid a foreclosure. We will assist homeowners to identify the best options for their needs. We provide consultations, property viewing, and assessments to determine a fair price for your home. Unlike other realtors and buyers, we make offers on homes “as is”, which means homeowners do not need to perform repairs on their property or worry about tenant problems. Our team will handle houses in any condition and can offer a quote on the same day following a property inspection. We can assist you every step of the way. We do not only find ways, we also help you create value.
What to expect: EveryHomeBuyer.com aims to provide free, no-nonsense service to homeowners worried about losing their homes. Once the property assessment is made, our team will make an offer in cash. Homeowners can expect to avoid realtor commissions and hidden fees. Once the homeowner accepts, we can close the property in seven days at the minimum. Our team guarantees transparency and a no-frills process to allow the homeowner to make an informed decision that will benefit them over the long term.