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Selling a Home in Pre-Foreclosure in Raleigh, NC

When you hit some bumps in life, it can be devastating. After the hard work and wonderful feeling of buying your home in Raleigh, to find your home in pre-foreclosure is a hard place to be. The good news is that pre-foreclosure is not a dire situation and there’s still time to make a change. There’s a straight line to a positive outcome if you take proactive steps.

Getting market price for distressed properties from real estate investors upon reaching pre foreclosure with a lending institution isn’t out of the question.

What is a pre-foreclosure letter

When you miss several mortgage payments, you home can fall into pre-foreclosure. You’ll know that this has happened because your mortgage lender will send you a letter in the mail notifying you that you’ve entered into pre-foreclosure. In all likelihood, you had an idea that this was happening well before the official notice comes in the mail. 

Though this is definitely a serious situation, it’s not the point of no return. Not by a long shot. You have lots of options when that letter comes in the mail before you lose your house. If this is your situation, step back and take a deep breath before you get emotionally involved. It’s a scary situation, but this notice is still early in the process. Above all, don’t panic!

A property owner who is behind because of unpaid taxes won’t be formally foreclosed on for a while. Making backdated payments or working out monthly installments can prevent a home from getting to the sheriff’s sale or public auction. The foreclosure process begins with delinquent payments, but being served with a letter is not the end of the process.

Just the first step in North Carolina

Pre-foreclosure is the first phase of the long and complex legal process that sometimes ends in a piece of property being taken back by the bank. Whether a family is ultimately evicted from their home in Raleigh depends on a lot of things happening in the interim. 

For homeowners in Raleigh who are behind on mortgage payments, the first step in the foreclosure process happens when the mortgage holder files a notice of default with the Wake County Clerk of Court. 

There are set amount of delinquent payments that a homeowner can fall behind with before they get a notice of default. This is set out in the terms of the mortgage. If you’re a Raleigh homeowner who’s in a tough spot, it’s important for you to look over your mortgage paperwork and find out what the terms of the home loan are. 

Judicial foreclosure in Raleigh, NC

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Before a mortgage holder can move out of the pre-foreclosure stage of the process, they have to go in front of a judge to get approval. The Wake County judicial system doesn’t move swiftly, so that leaves homeowners in Raleigh some time to pull the loan out of default before the house goes into foreclosure

There are four kids of foreclosure in North Carolina:

– Power of sale foreclosure

– Foreclosure by civil action

Tax foreclosure

– Homeowners association/condo owner’s association foreclosure

All four of these kinds of foreclosure in Raleigh, NC are handled in the court system. The last two involve a homeowner being behind on either taxes or fees associated with their home. The first two are done by a mortgage company or bank lender. The North Carolina General Statues make provisions for all four of these foreclosure processes in North Carolina. 

What is a short sale?

Short sale sign in Raleigh, NC

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In all four foreclosure situations in North Carolina, the homeowner has the power to negotiate a  short sale of the home or to go through with a traditional real estate sale or an all cash sale.

A short sale is when the home is sold for less than the amount owed on the mortgage. Though this is a preferable outcome to a full on foreclosure, a short sale often means that the homeowner will still ower money to the bank. Sometimes the difference in the price of the sale and the amount still due on the mortgage is forgiven by the bank, but not always. 

Often, a short sale situation involves a homeowner selling to an investor or a home buying company. In any case, the mortgage lender has to approve the sale of the home under these terms. Homeowners in Raleigh, NC facing foreclosure will need to contact their lender to negotiate these terms. 

In many cases, the mortgage holder will agree to a short sale if the homeowner agrees to a default judgement. This pulls the house out of foreclosure, but the homeowner will still have to make payments on the amount due to the lender. 

Pros and cons of a short sale

The benefit of a short sale is that it keeps foreclosure off of the credit rating of the homeowner. There’s no massive hit to the credit rating either, though there is still a detrimental mark placed in the credit file. A foreclosure stays on a person’s credit report for seven years. 

 It can take up to a year for the whole short sale process to go through, and it takes a lot of paperwork. 

 Fair, all cash offers for houses in foreclosure can also be part short sales. Pre foreclosure means that the mortgage loan is behind, but there’s still lots of time before the final foreclosure sale. The lending institution might still be able to work with a home owner to create a plan for affordable payments for people in financial distress. Short sales are not the preference for most lenders. They’d prefer backdated payments for a home in default status.

Banks don’t like foreclosure

One wonderful piece of news for Raleigh homeowners facing foreclosure is that banks don’t want to repossess your house. When a loan goes underwater and the bank has to sell the property, they lose money. The best outcome for the homeowner and the bank is to come to an agreement to keep you in your house. 

You can work with the bank to arrange a short sale. This allows you to get out with your home equity and them to avoid the costs of foreclosure. Whatever they can do to prevent you losing your house, within reason, a mortgage lender will do. 

Pre foreclosed properties are a top priority for banks. There are also government programs that can help pull a pre-foreclosure property out of the negative.

Options for homeowners in pre-foreclosure

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Lenders are generally willing to work with you and negotiate to keep your house out of foreclosure. 

Though the notice of default means that the wheels are turning towards a foreclosure, there’s still plenty of time to get back on track with your home loan. You might be able to catch up payments in a lump sum or to grade them out over time. There’s even the option to potentially refinance your Raleigh house in foreclosure. For that, you might need to get a cosigner or agree to a higher interest rate. 

If you’ve gone into default because of some life circumstance like a divorce, a job loss, or the death of a family member, you should talk to the mortgage company. Life circumstances happen to everyone, and these are usually temporary situations. You can negotiate a loan modification, make backdated mortgage payments, or arrange for a short sale of your house. 

During the COVID-19 pandemic, there were lots of provisions put in place to help homeowners stay out of foreclosure. For government-backed mortgages, evictions and foreclosure proceedings were halted. Though the crisis is past now, there are still government agencies that can help homeowners stay out of foreclosure. 

Is it too late to sell your home in Raleigh?

Selling a pre-foreclosure home in Raleigh is possible if you step into action. All the way up to the final foreclosure auction of the home, it’s possible to strike a last minute real estate sale of the property in Raleigh. 

Mortgage borrowers can connect with prospective buyers to get market value for their home. Short sales are sometimes the only options if you’ve missed payments on your home. Real estate-owned properties are a common, if unfortunate reality in Raleigh, NC.

To avoid foreclosure, either work with a real estate agent or reach out to a home buying company. As soon as you’re behind in monthly payments, it affects your credit history. The outstanding loan balance might seem like a huge hurdle to overcome, but paying down the mortgage balance with a quick, all cash sale can save your pre foreclosure property.

Keep in mind that once the lending bank reaches out to the county recorder’s office, that’s only the beginning. As a property owner, you have a lot of leeway to save your credit score. A foreclosed property isn’t out of the hands of the owner because a default notice is sent out.

Cash home buyers can help Raleigh homeowners in foreclosure to pull out of even the worst situation. 

How to Sell a Property When You Still Owe Money On It

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When you first qualified for your mortgage and bought your home, you were probably over the moon with excitement. Mortgage repayment generally runs from fifteen to fifty years, but in those first few heady days, you likely were more focused on moving in and enjoying your home. 

Eventually, most people have to sell their home for one reason or another, and often that loan is still on it. This might be because of a divorce, a new job, the desire to relocate for retirement, because of an expanding family, the need for more space, or even because of a financial hit. It might be as simple as the realization that the house isn’t right for you. It might be that the neighborhood was rezoned and now there’s a strip mall right behind your back garden. Whatever the reason, the mortgage isn’t cleared and the property needs to be sold.

Most homeowners don’t own their homes

Here’s something you might not know: if you still owe money on your home, you don’t actually own your home. It’s true! Until a mortgage is paid off completely, the lender technically owns the house. Whatever mortgage lender you financed your house through is the legal property owner. 

Legally speaking, a mortgage is the transfer of interest in a piece of real property to secure repayment of money. Your lender is securing the payment of the money you’ve promised to pay back to them through ownership of the property itself.

If a home loan falls into default because of missed payments, they can call up the secured asset; your house. That’s why when someone’s home goes through foreclosure, they are subject to the eviction process just like a landlord evicts a tenant. The lender repossesses the home just as a car lender can repossess a car. The difference of course is that the house can’t go anywhere, so the person living there has to go somewhere. 

The mortgage holder/homeowner relationship isn’t legally all that different than the tenant/landlord relationship. What a strange thing to realize!

The great news is that it’s not cost-effective for a mortgage lender to foreclose on a home. They are much more likely to lose money this way than if they can keep a homeowner in their home. It’s also a better deal for a lender if the house can be sold prior to foreclosure.

If you want to sell your home while owing money on it, the lender will have to sign off on the sale.  

Understand your mortgage payment

Though you might already know off the top of your head the buying price of your home, keep in mind that a mortgage is much more than that. Unlike rent, which is the full cost to live in a house and its straightforward, a home loan has lots of components. 

Mortgage payments include lots of different things.

– Principal
– Interest
– Taxes
– Insurance

The principal is the actual amount of the home. This is where you put equity into the house, where you’re paying down the price of the home. Interest is the fee that you pay the lender for allowing you to use their money. Taxes are the local fees that the government takes. Property taxes are built into every mortgage. 

Finally, there is insurance. Homeowners’ insurance covers damage to the home or accidents that happen to people on the property. That’s included in every monthly payment for every homeowner. Unless you put a significant amount of money into the down payment of the home, you’ll also likely have mortgage insurance to pay. This is a safeguard for the lending company for risky investments.

Principal and equity

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All of this adds up to mean that the full amount of your monthly payment doesn’t go to that sale price that you paid for your home. On the contrary, depending on the interest rate that you pay on your home loan and on other fees, you might end up paying as much as one quarter to one third of the sale price on top of the principal. 

Note that early on in the life of your mortgage, you’ll be paying more on interest and less on principal. The first five years of payments are much different than the last ten or twenty-five in terms of breakdown. 

Equity is the amount of principal that you’ve paid off on your mortgage. The more equity you have in your home, the higher percentage you own rather than the bank owning.  

Determine what you owe

Your mortgage statement will have a breakdown of everything that’s included in your mortgage payment. If you want to find out how much you need to pay the lender to clear the mortgage, you’ll have to request a payoff amount. 

This is a common request that mortgage lenders get all the time. If you have an online platform that you pay your home loan through, you should be able to get a payoff amount through an automated system. This might take a couple of days. The payoff amount is guaranteed for a certain amount of time, usually thirty days. 

Know your home selling options

sale of property

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If you haven’t paid off your mortgage yet, you can still sell your home. 

Your selling options are all about getting more for your home than what you owe on it. That’s why it’s important to know the payoff amount. 

The lending company wants to know for sure that they’re going to get their money back. That’s really all they’re interested in. If they’re sure that they’re going to get the amount loaned to you back out of the deal, they’re more than happy to allow the sale to go through. 

If you work with a cash buyer, a real estate agent, or a real estate attorney, those experts will be able to tell you what you need to know about selling your property. They can work with the holder of the loan and with a title company to get the closing documents together ahead of the closing date. You might also need a settlement statement or a proof of funds document depending on the regulations in your area. 

Many buyers have ways to make financing work, through a lease option or a contingent offer deal with the person selling their current home. Even if you have a second mortgage or an old house, you might still be able to cover the remaining amount on your loans. Never hesitate to get professional help from a tax expert or a real estate agent if you are unsure of your loan terms or the affect the sale will have on your credit.

You can sell your property with a mortgage on it to a cash buyer or to a buyer with a lender. A seller financing deal can help to satisfy the mortgage lender and pay off the loan balance. It doesn’t matter to the mortgage company as long as they have a guarantee that they’ll get repayment. 

When a home loses value

The real estate market tends to trend up. This is why real estate is considered such a great investment. However, there are always factors that can change that. 

For instance, remember the house with the strip mall from the beginning of this blog? Rezoning and new construction of commercial buildings can reduce the value of a home. Needed repairs, devastating natural disasters, etc. can also cause the price of a home to go lower than the mortgage cost. 

If you’re not able to sell the home for more than the amount owed, sometimes a mortgage holder will allow another buyer to assume the debt under the same terms. They’ll have to meet income requirements and go through a credit check just as if they were qualifying for a mortgage. 

You might also be able to work out a seller-financed deal to cover the mortgage debt. A bridge loan is another option if you can’t reach the mortgage payoff amount with traditional financing. You’ll want to seek out professional help for all of these options.

Selling a house with a mortgage

house with mortgage payments

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How can you sell a property with a loan on it? It’s actually pretty straightforward assuming you can sell the home for more than you owe on the loan.  Closing costs are a consideration, even for sellers working independently of real estate agents. Today’s market is generally favorable to sellers, so a traditional lender is usually more than willing to avoid short sales or foreclosure in favor of a sale.

Once the house is sold, the money from the sale is used to pay the mortgage company the remaining balance. This lets the homeowner walk away and pocket any leftover cash. Most mortgages are structured so that selling your home to a buyer with good credit and a bank to finance their new loan is an easy sell for mortgage lenders.

Having an existing finance agreement on your home doesn’t mean you can’t sell it. It just means working with the right people to help you sell a property with a loan on it.

How to Sell a House During Foreclosure

Think it’s too late to sell a house once it’s in foreclosure? Think again. 

A house is the biggest purchase that most people will ever make, and it’s a process that generally takes years of saving and building credit to make happen. Though people tend to think that getting a foreclosure notice means you’re out of luck, the great news is that it’s not the end!

To know how to sell a house during foreclosure, you first should have a grounded understanding of what the whole thing looks like. There is a definitive point at which you can no longer sell your property in foreclosure, but up until then it’s possible to work with a we buy houses company, a cash buyer, or even a traditional real estate agent. Pulling the your home back from the brink gets you back some of the equity you put into it. When you’re in financial trouble, it’s always a good idea to get legal advice for how to deal with a mortgage company.

Types of foreclosure

There are two different types of foreclosure – non-judicial and judicial. These are exactly what they sound like. A court proceeding oversees judicial foreclosure. The lender or other foreclosing party files a lawsuit that starts the gears turning.  In non-judicial foreclosure, the lender follows a proscribed series of steps that are built into the laws of that particular state. 

Some states have both options, and some states only have judicial foreclosure. Generally, one state has one kind or the other that is more common. 

Depending on the state you’re in, you could also be subject to a deficiency judgment. This means that you’ll have to pay the balance of the mortgage after the lender sells the home. For instance, if your home sells at auction for $70,000 but you still owe $100,000 on the loan, then the lender can come after you personally for $30,000.  

Federal laws surrounding foreclosure

Did you know that there is no deadline set in stone for the time between a missed payment and foreclosure proceedings? All fifty states have slightly different processing times. Federal guidelines mandate how long you have to bring mortgage payments up to date before you are in danger of having a piece of real estate foreclosed on. 

United States federal laws protect homeowners from being foreclosed on too quickly. For most homeowners, there is a minimum of 120 days between the first missing house payment and the lender being able to initiate a foreclosure proceeding. That’s roughly four months, and any mortgage payment that you make during those months extends that timeline.

Financial hardship is a common problem that affects many homeowners, who find themselves either having to declare bankruptcy, come up with a plan to pay the balance remaining, or go through the short sale process. Unfortunately, a foreclosed home is not going to go for market value. 

Steps in the foreclosure process

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There are many steps in foreclosure, and it only starts with that official notice that the mortgage lender has moved to start proceedings. Here are five steps in the foreclosure process.

1. Default

The homeowner misses mortgage payments for three months. This is the first step in the pre-foreclosure process and it’s the first red flag for someone facing foreclosure.

2. Notice of default

After 90 days of missed mortgage payments, the lender sends a notice of default to the homeowner. This actually a public notice that gives the homeowner thirty days to catch up the loan.

3. Notice of trustee’s sale

This is where things take a turn towards finality. The lender, in conjunction with their attorney or a trustee, schedules a sale of the property. This sale doesn’t usually happen for two or even three months. 

4. Trustee’s sale

The property sells in this auction. The highest bidder who can meet the requirements of the foreclosure sale will get the property. Note that, depending on the state, offers from competing buyers push the final date of the trustee’s sale out for months before the final sale. 

5. Eviction

When the sale is complete, the homeowner now faces eviction from the home. An eviction notice mandates that the individual leave the property immediately. At the time of the final eviction, a law enforcement officer will often go to the home to ensure that the former homeowner removes all of their belongings and exits the property.

If bids on the property do not reach the minimum amount owed on the mortgage, the property becomes “bank owned” or “real estate owned”, which means that the lender takes possession of the property.

Date of sale is the end of the line

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A homeowner can make an arrangement with the lender to pull the house out of foreclosure all the way up until the final sale date. This means that they can find some way to get the money together to pay off the past due mortgage amount and keep the house, or they can sell the house to another party. 

If a homeowner gets a new job or has some other new stream of income, the lender can work with them to extend the deadline for foreclosure through loan modification to repay the remaining mortgage debt. Keep in mind that it’s in the best interest of the lender to keep the homeowner in the house. Foreclosure generally represents a loss of money and time for the bank. There is no guarantee they will get the full amount of the mortgage on a piece of real estate in a foreclosure proceeding.

Pre-foreclosure specifics 

Cash buyers can pay off the mortgage amount all the way up to the auction date.  Potential buyers are willing to pay cash for foreclosed real estate, which can help to mitigate the negative impact on the credit score of a homeowner facing foreclosure.

Pre-foreclosure goes all the way up to the moment that the mortgage lender actually transfers the deed out of the name of the homeowner who can no longer afford to pay the remaining balance or even just catch up on delinquent payments. Sale proceeds from selling a piece of real estate to a bank or third party will go to pay legal fees and foreclosure costs as well as going directly towards the remaining balance owed to the mortgage lender.

Sharing financial information or writing a hardship letter can make it easier for a mortgage to stay in preforeclosure and prevent an unwanted change in ownership. Even if the homeowner is not able to maintain ownership of the home, in most cases they can at least get a market value for the property.

What is a short sale?

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A short sale is when a homeowner sells the home that they own and the money goes directly to the bank. This kind of sale doesn’t always cover the total amount of the mortgage, and the homeowner can be expected to cover the balance if it doesn’t. A deficiency judgment can be awarded to the lender if the short sale doesn’t cover the amount of the remaining loan on the property. 

Working with a real estate agent or an attorney can help you to navigate a short sale, and it’s possible to save money when you avoid foreclosure with this method. 

Once a person decides to go for a short sale to avoid foreclosure, then they have to find a buyer for the home. A real estate agent can help to find a potential buyer, or we buy houses companies can let you know what options they offer for getting a short sale on a home. Getting a cash offer for the price of the mortgage is a great way to avoid foreclosure. 

Remember, with a short sale to pull the homeowner out of foreclosure, only expect to get back the money owed on the home. 

Work with your lender to avoid foreclosure

Just as a homeowner worked closely with their lender to get the original loan on the home, so too must they work closely with their lender to pull the home out of foreclosure through a short sale. Be careful about giving too much personal information to the lender, however, as this can be used against the homeowner in the case of a default.

Reach out to your home lender to find out what options you have to sell your home during foreclosure. They have much more latitude than most people realize to alleviate foreclosure. A great short sale can be a much better solution for a lender than sending the property to auction! 

The bottom line here is that if a lender agrees to stop foreclosure because of a solution to sell the house fast, as is, and at a fair market price, then both the homeowner and the mortgage lender come out on top. The foreclosure process can be intimidating, but it doesn’t have to end badly.