A foreclosure is one of the most unsettling pieces of mail you will ever receive in your lifetime. It is never a part of anyone’s homeownership vision. Unfortunately, life is unpredictable, and we often find ourselves caught up in unplanned circumstances. Knowing that foreclosure is approaching can be very distressing, especially when your family is under a financial strain.
While a foreclosure warning is definitely not pleasant news, ignoring the issue is not going to make the problem disappear. Failing to respond on time or take the appropriate measures can lead to much worse and never-ending problems.
Selling a house before foreclosure is a suitable option, and it might be the only real and practical option you have. While selling your house can be a daunting thought, but when you approach the problem logically, you can realize that it will help you with your financial struggles in the future.
What Is A Foreclosure?
A foreclosure on property happens when the property owner fails to pay their mortgage and fall behind. The owner essentially losses all the rights to the property, and if they cannot pay their outstanding debts or sell the house, the property goes into a foreclosure auction. It ultimately leads to your property getting seized by the lender.
It is crucial to remember that if you are falling behind on your mortgage payments, you should discuss the situation with your lending institution. They might be able to help you come up with a plan or solution to stabilize your position. A lender does not want your property to go into foreclosure as it is a hectic and time-consuming process that almost always ends up in them losing money.
How Does A Foreclosure Affect Your Credit Score?
On top of losing the ownership of your house, a foreclosure can put a lasting strain on your financial health and stability. As your credit score drops substantially, you will possibly find it very challenging to invest in a house in the near future or be qualified for any other form of credit. A foreclosure usually remains on your credit report for around seven years. It starts to repair itself after a couple of years. To avoid a stressful situation, you can opt for selling the property.
Can You Sell Your House Before Foreclosure?
You absolutely can. An important thing to remember is that the foreclosure is split into two processes, the pre-foreclosure, and the actual foreclosure. A pre-foreclosure begins you’re your bank has started the foreclosure procedure, normally when you are 90 days behind on your mortgage payment. At this point, you are legally still the owner of the house. It is around this time when your lender will notify you that you have defaulted on your mortgage payments.
The actual foreclosure is when the lender takes the property back due to a failure of payment. Once you lose the legal ownership of the house, you will not be able to sell it, and the only way out of the situation is to file bankruptcy, which can get messy pretty easily. The whole point of the pre-foreclosure period is to allow you some time to take the appropriate course of action before the situation gets out of your hand. Selling the house before the actual foreclosure can save you from a lot of trouble and financial strain.
How Long Does It Take for A Bank to Foreclose Your House?
The exact time period depends on the state, but generally speaking, the homeowner will be allowed about two to three months after the initial notification before the house is actually foreclosed. For many cases, the bank takes a total time of six to twelve months to foreclose on your property, depending on how aggressive their approach is after the non-payment.
Selling Your House in Pre-Foreclosure
When the homeowner received the Notice of Default from their mortgagee, they have an opportunity to find a solution to pay the due finances or the associated fees. Unfortunately, paying off the outstanding balance right away is not always feasible for the homeowner. In that case, they are selling the property before the foreclosure is the best option.
As an initial step, you should contact your lender because even if you are planning to sell the house, you might end up on the hook for the outstanding balance of the debt. As the property is sold for less than the owed amount, your lender can legally pursue you for the remainder. Thus, before jumping ahead to find a buyer, talk to your lender and ensure that the sale will settle your debt in full amount.
Hire A Real Estate Agent
After receiving a foreclosure notice, you usually have a limited amount of time on your hands, and you have to act quickly to make the right decision. When time is a huge constraint, it is best that you hire a real estate agent to help you with the selling process. A skilled and experienced real estate agent will be able to figure out how much your house is worth, how much money it can possibly fetch, and if that amount is sufficient to pay off the mortgage. Real estate agents can also negotiate with the lenders to lower the amount they will receive in a short sale to save the house from foreclosure.
Short Sale to The Rescue
It is important to remember that the lenders hate foreclosures as much as you because of the financial and legal headaches. This is essentially why certain lenders agree to a short sale where your property will be sold at a price lower than the owed amount. Going with the short sale is more of a frantic action on the lenders’ end as even though they do not want to lose money on the mortgages, they also don’t want to invest their time in foreclosing on, owning, and then selling the property.
After filing the paperwork explaining how you ended up in the financial predicament, you may be able to convince your lender to go for a short sale. A short sale will help you avoid foreclosure and can save you from the credit score decline.