Life can be unpredictable, with hard times like death, divorce, joblessness, or medical debt. To make matters worse – the unpredictability of life may even lead to you missing mortgage payments due to the immense pressure it puts on your finances.
When you receive those dreaded overdue notices from your mortgage company, it’s normal to feel a wave of sadness and panic. You may try to push the problem out of your mind in the hopes that it will disappear or believe there is no other option but to lose your home.
At this point, you may ask yourself, can I sell my home during foreclosure?
Selling a home during a foreclosure can be done, but you must accept the situation and take immediate steps. Acting decisively is crucial for foreclosure prevention, as waiting until your home is just days away from foreclosure will be too late.
If you have already explored all avenues to remain in your home, you must act quickly and get the house sold – or risk experiencing the problematic consequences of foreclosing.
Selling a House in Foreclosure: Information & Advice
According to the federal regulations that shield homeowners facing foreclosure, in most scenarios, your loan servicer can only start a foreclosure once you’re more than four months late on payments. Plus, there’s no predetermined time limit for selling off the property after beginning the process.
It may be more beneficial for specific individuals to surrender their houses and move on. If this is the case, there are two approaches they can take; you should select the tactic that causes minimal financial and emotional strain for you and your family.
What is the Foreclosure Process
If you fail to pay off the money borrowed, your lender or home loan owner is legally entitled to take ownership of your property and sell it to cover their losses – a process commonly called “foreclosure.”
Notice of default
After delinquent payments accumulate for at least three months, lenders will issue a written notice of default to the homeowner, alerting them that legal action is imminent if the debt remains unpaid. Moreover, they will publicly report their intention to take court proceedings by filing it with the County Recorder’s office.
The home sale
Banks will typically resort to judicial or nonjudicial foreclosure to recover the money they’re owed. The specific method used depends on state regulations in the area where the property is located. If borrowers remain unable to make payments and do not contact their lender, then lenders are likely to move forward with one of these two options.
Generally, a foreclosure auction or trustee sale will occur to fulfill the lender’s goal of selling the property so that they can recoup what is owed on their loan.
As a starting point, auctions typically begin with the minimum bid being whatever amount is still owed on the loan. From there, whoever puts in the highest bid will end up as the proud owner of your former home. Once it’s sold at auction, you must move out and relinquish possession of that property.
How Does Pre-Foreclosure Work
Pre-foreclosure is the initial part of a legal proceeding that may finally lead to a property being taken away from its defaulting borrower. Lenders file a notice of default on the property in pre-foreclosure when the borrowing owner fails to meet their contractual commitments for overdue payments.
Missed mortgage payments
When a homeowner misses three months of their mortgage payments, they enter an unofficial preforeclosure process, with the first steps taking place after one missed payment. Consequently, this begins to initiate the foreclosure proceedings.
Notice of default
When an individual becomes delinquent and fails to pay their loan, they will be issued a Notice of Default. This notice is also made public on the court’s record, thus initiating the pre-foreclosure process, which can range from weeks to more than one year, depending on the jurisdiction. Moreover, this entire procedure must be completed within the framework of a legal proceeding in compliance with state regulations.
The notice of default marks the start of the pre-foreclosure phase, during which a lender requires court authorization from a judge for their rightful claim on an estate.
How Can You Avoid Foreclosure
Nothing in life is guaranteed; financial hardship can strike anyone, even you. When struggling to keep up with mortgage payments and foreclosure appears imminent, don’t assume the worst yet.
Apply for forbearance
A forbearance agreement may be ideal if you’re battling to make payments. To qualify, demonstrate that you are capable of paying on time shortly. When your forbearance period ends, it is necessary to resume regular payments and add extra funds to cover any missed installments.
Get current on your loan
Homeowners with enough cash to cover reinstating their loan can pay all missed payments, principal, interest, and any fees or expenses. Furthermore, individual state laws typically give homeowners a specific period to reinstate their loans on a foreclosed home.
A loan modification is an agreement between the lender and borrower to amend the mortgage terms with a single goal: reducing monthly payments. For the most part, modifying a loan includes decreasing the interest rate, adding any past-due payments to the balance, and stretching out its term from 30 to 40 years.
Negotiate with your lender
There’s hope if you’re still catching up on your payments! You can build a repayment plan that allows you to make up missed payments gradually and keep current with ongoing ones simultaneously. A repayment plan is ideal for getting back on track without worrying about further delinquencies or defaulting on loans.
Your income must cover current and past due amounts for the plan to succeed. The repayment schedule is usually set at three, six, or nine months, depending on the circumstance.
Refinance your home
Don’t let a looming foreclosure stand in your way of achieving financial freedom- refinance and start anew. In most states, you can redeem your mortgage by refinancing until its sale. Some jurisdictions even provide redemption opportunities post-sale. So if you can find an improved rate that allows for the payoff of your old loan, now is the moment to act.
What to Do if You Want to Sell Your House During Foreclosure
Selling a home fast during the pre-foreclosure phase can mutually benefit all parties involved. Pre-foreclosure sales are great options for homeowners who want to avoid damaging their credit histories, buyers looking to purchase properties below market value, and mortgage lenders who don’t want to pay costly foreclosure proceedings, get liens, or sell the property themselves.
Selling your house during foreclosure might not be what you want to do, but it’s better than an eviction.
Gaining approval from your lender may enable you to sidestep foreclosure by selling your home for less than the remaining loan balance: known as a “short sale.”
If you reside in a state that allows lenders to sue for deficiency judgments after short sales, it is best to ask your lender if they will release the debt owed. However, be aware that there might be tax implications if the lender does grant forgiveness of this amount.
Deed in lieu of foreclosure
As an alternative to foreclosure, you may be able to work with your lender and sign a “deed in lieu of foreclosure,” which would allow the property title to be transferred without having a formal foreclosure process.
Before you take this course of action, both parties must provide a written agreement that the lender will not pursue any remaining balance due between the fair market value and your outstanding debt after the sale. It should also be noted that if the lender forgives a deficiency, there may still be tax implications associated with this transaction.
How to Sell Your House in Foreclosure
Before you reach your scheduled auction date, take advantage of the option to sell your home if foreclosure proceedings have commenced independently. If it’s not a short-term loss in income but prolonged financial hardship that has caused this situation, selling might be your best path forward.
Not only will it free up money by relieving you from paying off mortgage debt, but there is also a chance that you could make significant proceeds on the foreclosure sale.
Determine your home’s value
Get an accurate estimate of your home’s worth using a reliable online tool.
Talk to your lender about your mortgage
Contact your lender to find out exactly what you need to pay if you want to sell. If foreclosure notices have been issued, chances are that several months of mortgage payments have gone unpaid. Subsequently, when the time comes for sale, this amount will be due, and additional late fees as well – so it pays off to know beforehand.
Review foreclosure communications
Review any recent foreclosure papers from them to figure out what amount is owed to the bank. The final number should include all principal and interest payments left to be paid. Then you can subtract that total from your projected sale price to understand the remaining balance due on your mortgage loan.
Deduct closing costs and other selling fees
When you are selling a house, there is always an associated cost. This includes expenses for staging and grooming the home before the sale, as well as real estate agent or Realtor commissions, closing costs, seller concessions, and moving costs – all of which must be considered when calculating your final sale price.
Talk to your lender
Staying in communication with your lender is paramount. Even if you need clarification on the specifics, keeping them abreast of your plan moving forward is essential. Most lenders prefer to work with you to facilitate a successful house sale than proceed through foreclosure and make a loss on their investment.
How to Avoid Foreclosure at the Last Minute
File for bankruptcy
If you wish to maintain home ownership, Chapter 13 bankruptcy could be the solution. When you face foreclosure, filing for bankruptcy isn’t always the best solution. Nevertheless, if substantial other outstanding debts can be eliminated, then declaring bankruptcy may make sense financially.
If a foreclosure has already been initiated or you have significant equity in the property, it’s unlikely that a Chapter 7 bankruptcy would help. A Chapter 7 filing may temporarily halt foreclosure proceedings but cannot prevent them long-term.
Sell to cash home buyers
You can still take action when you get a notice that foreclosure has been initiated. Usually, the foreclosure procedure is only concluded once the bank sells the house at an auction or gains lawful possession.
The traditional methods of selling a house might be too slow for your current needs. Between enlisting a real estate agent, appraising the property to get it ready for showings, listing it, and then showing it to prospective buyers before accepting their offer and closing can take far longer than you may have time.
A cash buyer can help you during foreclosure. They are involved in every part of the process, ensuring you get a fair deal on your property. With the proper process, you can even avert foreclosure if your time to negotiate with your lender is dwindling.
The process is expedited without real estate agents, brokers, appraisers, or financing. Get a cash offer and the total amount at closing with no strings attached. Act fast to avoid being a victim of foreclosure. Selling your home quickly can make all the difference in preventing long-term harm to your credit score, allowing you to move on with life and begin anew.
Foreclosure can be a terrifying and overwhelming experience. However, quickly addressing the situation head-on maximizes your chances of resolving it while still possessing the house without it damaging your credit report.
Moreover, the options available protect your credit score, let you avoid the hassle of a home sale, and minimize how long you must wait until purchasing another home. Don’t wait until the last minute – take control now.