When you purchase a home with a loan, you sign a contract that states you will repay the mortgage loan according to a contractual agreement. These are usually in the form of monthly payments. If the borrower (homeowner) fails to make payments three consecutive months or more, the lender will begin the pre-foreclosure process.
Three months of missed payments, and you’ll go into default. At this point, you can work with your lender to avoid foreclosure if possible. Lenders will typically want to help you avoid foreclosure because it is expensive for you and the lender to evict you. You can negotiate lower payments, delay payments, or even restructure the loan.
After three to six months of missed payments and no redemption attempt, you will receive a notice of default. The notice of default is made a matter of public record and serves as a written notice to the homeowner that the lender will pursue legal action if the debt is not paid back. The Notice of default officially begins the pre-foreclosure process, which depending on the state, can last 3-12+ months.
If the loan has not been repaid within the state’s allowed time frame, then a notice of trustee sale will be recorded in the county where the property is located.
Your property will be published in the local newspaper indicating that the property will be available at public auction. The owner’s name will be printed in the notice and newspaper, as well as its address, a brief description of the property, and when and where the sale will take place.
Your home will now be placed for public auction and purchased by the highest bidder. If your home is not sold during the auction (usually a result of expensive liens or other costly repairs), the lender will become the owner and attempt to sell the property through a broker. Sometimes the bank can remove some of the liens to make the property more attractive to investors.
During this entire process, the borrower can stay in the home until it has been sold. Once sold, an eviction notice is sent demanding anyone living at the property must vacate the premises immediately.
The borrower still living at home is given a few days to collect and remove personal belongings before the local sheriff visits the property and removes anyone left inside.
There are several options when it comes to stopping or avoiding foreclosure on your home. First of all, if you can’t afford the house, you need to sell it. The quicker you can come to that conclusion, the better. If you would like to sell the property, start by calling your lender and telling them you intend to sell and pay off the mortgage. Typically lenders are forgiving and, if requested, can allow you more time to sell before losing your property to an auction or the bank.
Even after contacting your lender, you will want to take action quickly. If you cannot sell your home in time, you won’t only lose your home and thousands of dollars, but serious damage can be done to your credit.
When time is short, getting your property sold should be your number one priority. Working with a company specializing in foreclosures can help you navigate the legality, paperwork and answer any questions you have. Typically, these companies offer fast, hassle-free, all-cash closing, making the entire process simple and straightforward.
Sometimes these companies offer other perks like cash advancements and flexible closing deadlines to help accommodate your unique situation.
Foreclosures aren’t only a pain for the borrower; the banks also hate forecloses; that’s why some lenders will agree to short sales. A short sale is when you sell your home for less than everything you owe.
Lenders don’t always agree to short sales as they are losing money on the mortgage. But they also don’t want to waste their time forclosing on, owning, and selling property. It never hurts to ask, and if you are lucky, they may agree to work with you on a short sale.
This will still save you from the huge hit your credit score takes due to a foreclosure.
What you shouldn’t do is hide from your lender.
Lenders will take legal action if you do not try to work out a deal with them. Your best option is to call and talk to your lender, ask for more time to catch up on your payments or refinance.
If all else fails, there are still other ways to stop foreclosure.
Feeling overwhelmed and not sure what the next best step is? We can help! Connect Home Buyers has helped dozens of homeowners facing pre-foreclosure.
We offer free consultations to anyone seeking to stop foreclosure and resolve debts. Please fill out your information below, and one of our specialists will contact you during business hours.
“Because this is new for us, the whole process is new for us. Working with the bank, working with your actual realtor. We didn’t even have to get a realtor, so we had to do nothing. The only thing we had to do was paperwork with the bank, and you all took care of the rest. You made us comfortable leaving our home. We didn’t worry about it and sit back and say, well, maybe we made a mistake. There was no second-guessing with us because you didn’t make us second guess. You made us feel comfortable that this is the right choice, and we are doing the right thing.” -Mike