What’s worse than the financial turmoil of being behind on mortgage payments? The stress. That horrible, gut-wrenching feeling when you’re lying in bed, mulling over what you’re losing. All the late-night YouTube searches for “alternatives to foreclosure near me.” Suddenly, you’re in the deep rabbit hole of blogs about losing your house. You’ve cornered yourself into the weird part of the internet with nothing to show for it.
Yet, there is something you can do. A few things, actually. Selling your home before being foreclosed is an option in many cases.
This post is written for those out there wondering, what are the implications of being foreclosed? We are here to tell you they don’t have to be that bad.
And, of course, you have options. “Know your rights!” is something people tend to scream at you in stressful times. But I’m here to tell you – instead of waiting for it to happen…
Knowing some things about the process now can solve many stresses later. It’s a lot of information, but with calculative movement, it can all work out just fine for you.
There are some things you should be aware of first. This post is for those who are new to escaping from their bank. This is Pre-Foreclosure 101. Homeowners looking to get back on their feet again, financially and emotionally speaking, may want to consider selling their home or seek foreclosure help.
Understanding Foreclosure
Foreclosure is a serious legal process that is triggered when a homeowner does not make their scheduled mortgage payments. As a result, the homeowner’s lender is allowed to retake possession of the home. When does this happen, you may ask? Various steps of the formal foreclosure process usually start after enough payments are missed (typically around three to six), and begin the official/unofficial legal proceedings. This may also be when you start receiving little notices in the mail called “notices of default.” If you receive one of these, it essentially means that you didn’t pay your mortgage, and if you don’t, you’re at risk of losing your house.
Why is this important to know? First, we do not want you to lose your home—we indeed want to help you avoid that dreaded “f” word. Foreclosure is not fun. It can be emotionally antagonizing, scary, and even a little bit life-consuming because of everything that the process entails —including the potential for long-term damage or strain on one’s credit report and seemingly relentless phone calls from the mortgage lender’s loss mitigation department. Depending on how severe the situation is, some mortgages can be reported extremely negatively on credit reports and may potentially make it difficult for those to attain future loans, another home to rent, and other miscellaneous yet life-altering or significant events related to their situation. In addition to phone calls, receiving snail mail for this sort of situation isn’t exactly the ideal item to find in the mailbox either, to be quite frank—among other negative aspects that foreclosure can and may cause to happen in one’s personal life, relationships, and overall mental freedom.
What is your best solution? Come prepared. Learn about what rights you have as a homeowner and as an individual in general. Many states offer alternatives for homeowners that may be struggling to make payments, such as loan modifications or another type of financial assistance. Learn more about these resources and come in prepared.
The Foreclosure Timeline
The foreclosure timeline is a critical progression that starts from the first missed mortgage payments. Lenders typically allow a short grace period at the start where only a late fee might be applied; as the situation escalates, with late payments all homeowners will begin to receive late notices, and to start the foreclosure timeline late payments must become persistent. With no action or communication to work out a plan to make payments, in time late payments will lead to loan default\n.\n\nWhen the timeline reaches the notice of default stage for homeowners, a clear signal will be sent stating that the loan agreement has not been held up to (i.e., default). This warning signal will act as a notice to homeowners to have the problem taken care of; it’s a simple “do this or that will happen” message. Additional options, of course, should be sought after, such as a workout option like a loan modification or repayment plan. Other choices can also range from either deciding to sell at this point or to let the proceedings come to an end—more on this in the section below.\n\nAs the foreclosure timeline progresses, the proceedings will accumulate in the final stages to a notice of foreclosure sale, where the property will be auctioned off at sale. Notice typically doesn’t take too long to receive, sometimes about a week before the actual sale—sales are usually performed months later after the first notice arrives. Notice of sales can vary; there may still legally be some time to take final action to prevent losing a property, but this doesn’t leave homeowners with much room for negotiation. It’s the bank’s final warning!
The Importance of Acting Quickly
Sitting on the bench during a foreclosure is a risky proposition — one that can lead to thousands, if not tens of thousands of dollars in losses for homeowners.
As the clock continues to tick, your home (aka the property you are about to foreclose on, but now are keen to sell) is likely declining in value. And as a result, you are going to get less money when you sell it. This can happen for a variety of reasons, such as market conditions and the stigma associated with a home being labeled as a distressed property. The last thing you want is to wait so long that you owe more on your mortgage than your home will sell for! This will create a pretty big problem for you if your goal is to recover financially.
Then the foreclosure process itself can present a number of issues. Like I already mentioned, you likely face a number of fees, legal costs, and penalties — all of which tend to increase the longer you wait. The process is also kind of complicated, which just makes doing it that much more difficult. At some point, it’s easy for people to get so overwhelmed with everything going on that they make poor decisions that increase the likelihood they will face additional financial reductions.
The point is that you need to act fast if you’ve found yourself in the unfortunate situation of being at risk of foreclosure. Not only will you likely be able to get a better price, but you also run the risk of recovery being harder for you in the future among other things. I also recommend you engage with real estate professionals experienced or specifically trained in the sale of distressed properties — just another quick hint that could also help you get the most money back when you eventually decide to close the deal.
Recognizing a Foreclosure Notice
Receiving a foreclosure notice is a devastating reality for homeowners. The notice means the lender will begin the process to take back the property because of missed mortgage payments. The notice isn’t a restriction. It’s an extremely important call-to-action for homeowners. Homeowners must look at their situation for what it is and use it as motivation to help themselves.
The next step when receiving a foreclosure notice is to carefully look over it for accuracy. Homeowners should read the notice from the lender with the amount they owe on the property. The notice might have a timeline of when the lender will foreclose on their home. If something doesn’t feel right when they’re reading their notice, homeowners should contact their lender about the foreclosure. If the lender is falsely trying to foreclose on the home, it is best to know in advance for homeowners, so they can discuss their problem with the lender immediately.
This lender is useful because it is possible the lender may try to foreclose on the home in a different state besides the homeowners. A lawyer has full understanding of the situation. The homeowners with a foreclosure sale date appointed can benefit most from this type of help because they will only have to pay the back payments; fees might be removed from the homeowner’s bill.”
Options for Selling Your Home
Homeowners who believe that foreclosure is imminent may feel as though their lives are spinning uncontrollably. However, another course of action is to consider selling a home before the foreclosure process has been completed. There are several reasons why this strategy may have better results:
- Homeowners can recover a greater portion of their equity. Since defaulting homeowners will sell willingly, they may be in a position to price their house with a financial cushion.
- Setting a price for a home will be largely determined by the homeowners. They can check comparable prices for the area in which they live and make their decision based on known facts.
- There may be less stigma associated with this course of action since recovery appears as though it was initiated by the homeowner.
You have several selling options in front of you. Let’s review one by one the various ways that you may choose to sell your home:
- Those with real estate agents
- People selling online
- Those considering cash buyers (sell for cash)
Short Sales as a Foreclosure Help Option
A short sale occurs when a homeowner chooses to sell their home for less than what they owe on their mortgage. This option is usually pursued by a homeowner suffering from hard financial times who can no longer afford to pay the mortgage on their home.
The other alternatives? Foreclosure. And foreclosures suck.
In a short sale, you could get out from under your mortgage payments, sparing yourself the horrors of foreclosure. It’s no easy task though—getting your lender to agree to accept a short sale can be quite a feat in and of itself, but we’ll get to that.
Working with Real Estate Professionals
The typical home-buying process can be complex in its own right, but foreclosed homes add a whole new flavor to the mix. There are many legal and financial particulars associated with a foreclosure, and having an expert on your team can help you handle each one head-on.
Not only that, but seasoned real estate agents are going to have great insight into the local market as a whole and, in particular, the specific prospects currently available. There is a huge gradient of physical condition and value among homes in a specific market. If you’re not careful, you might look at a $50,000 foreclosure and see a great deal—where, in reality, you’re looking at a $100,000+ renovation.
Give that exact same situation to an experienced foreclosure sales agent, and they might be able to leverage that information and his network of investors to fetch a $20,000 finders fee. A keen eye like that can only come from one thing—seasoned experience dealing with foreclosures.
Most of the time, this comes from having established relationships with the banks. Every bank is different, and you might be surprised to learn that some of them are flat-out difficult to deal with in a foreclosure situation. If you’re trying to force yourself onto this little island where they stash all the foreclosing homeowners, there’s probably not going to be enough real estate to go around!
Legal Considerations
Homeowners do have rights when facing the threat of losing their home. The rights to receive proper notice, to be able to legally contest the proceedings, and the right to consideration for the same sorts of alternatives and loss mitigation, including loan modifications, should not arbitrarily change.
Homeowners will generally have a realistic period to object and seek bankruptcy or repayment plans but should consult with an expert so that they can fully vet and imbue their plan with credible capacity.
Courts provide this one area where homeowners can force the issue on their lender, invite the state to assist, and compel an open, reflective, and knowledgeable discussion about an authority, allocation of interest, principal, title, control, and any unclean hands.
Experts also say that although it may be unfair and not balanced, most of the stakeholders bring a higher equilibrium in their trade-off that more than pays for it down the road.
Don’t try to do this yourself – you will forever wonder how you got so much farther than the modification would deliver in a solution, had you successfully foreclosed, and the likelihood is overwhelming for a friendly judge able to hear your rehearing motion. “Consulting with a lawyer can not only help you understand your rights but also assist you in dealing with the foreclosure. It could be that you do have some defenses to the foreclosure. If so, a lawyer can help you decide how best to assert those defenses.”
The Role of the Court
The court is part of the foreclosure story and plays an important role. The court is the intermediary that helps lenders interact with homeowners. When you default on your loan and the foreclosure proceedings start, you often receive a document from the court. By consultation, homeowners must know that this document is a legal item. It is a sign that you are now in formal legal action. This default action often starts the foreclosure. It is important that you understand the kind of legal action the court is bringing to you. If you do not respond, you will be made subject to court “default” judgment. This judgment means you lose your home.
: You will need to respond to the court – this is important. Remember, you have a very specific time to respond. This time may be as little as two weeks or 14 days. Others may have the opportunity to pay back the missed payments on the note (depending on your laws). This process is the legal area where you may need an attorney, perhaps, to talk to a “similar case” housing counselor. The court may, in other states, allow the foreclosure to “advertise” and public-allege the foreclosure at a public courthouse. This extra protection is allowed for the property foreclosure party to assert any public questions or allegations. This process allows you to be extra confident and reserved as you work through your specific legal situation.
For homeowners, the thought of facing foreclosure can be suffocating. You can regain your breath by first understanding what happens during a foreclosure. To put it simply, a foreclosure is the process of your lender repossessing your property because you have failed to make monthly mortgage payments. This timeline of what happens during a foreclosure will set you on the path to controlling your next move.
Don’t wait. Stop foreclosure from happening when it first begins: Seeking help earlier means you have more options. More options for when a professional helps you avoid foreclosure can mean keeping your name off the next foreclosure property list or avoiding a short sale. To truly know what your options are, start as early as you can. You might be able to negotiate a loan modification, apply for a forbearance, or review refinancing with your lender. Understand the consequences of each of these scenarios as you make your decision.
Explore what can happen come auction time: A home sold at auction typically fetches less than value. Research homes in Irvine for a good understanding of what the selling price might be. Researching the housing market will give you the facts to set up your next steps. If you turn to the help of a real estate pro, you can get professional help when you sell your home. These real estate sellers are licensed to analyze the housing market in Orange County. When selling your home first is your best course of action, seek help.
Beware of legal matters: Always seek legal advice when you need to understand foreclosure laws and how to handle your foreclosure case. Credit reporting for loan modification is different from a short sale, or job loss, or severance written into a lease agreement, or HOA assessments, etc. Seek legal help to avoid a deficiency or a lawsuit.