Introduction
For almost everyone involved, foreclosures are lose-lose situations. Homes are lost by many homeowners. In order to complete the foreclosure process, banks must spend money and nearby properties lose value.
There are several ways to prevent a foreclosure, which is good news. Selling the property before the foreclosure process is complete is one of the best options. We’ll go over selling your home in this guide so you can stop the foreclosure process from happening.
Selling Your Home Before Foreclosure
The lender reclaims ownership of a mortgaged property during a foreclosure. Meaning that the lender may take back the property that was bought with the loan it extended to the now-delinquent borrower if the borrower defaults on the terms of their loan by failing to make payments.
You run the risk of losing your home if you stop making mortgage payments and default on your loan. In addition to causing you to lose your home, foreclosure can damage your credit history. Due to the severe consequences of this process, many homeowners will look for nearly any means of avoiding foreclosure. Selling your home before the foreclosure process begins or is finished is one option, depending on the particular needs of your family.
The Best Way To Sell Your House Before Foreclosure
Before a foreclosure is “done deal,” there are primarily two ways to sell your house. The initial method is a short sale. The second option is to sell your house through a typical real estate deal. Before or after the foreclosure process starts, you can try to sell your house, but not once the foreclosure action is finished. The lender or a new homeowner are now the legal owners of the property once it’s complete.
It’s best to look into selling your home as soon as you realize that you’re experiencing financial difficulty that will prevent you from making on-time payments if you want to avoid dealing with foreclosure. By being proactive, you’ll have more time to find a buyer who will pay a fair price for your house. Nevertheless, you can still sell your house if you wait until the foreclosure process has started. Due to the fact that you must sell it before the bank can seize it or sell it at a foreclosure auction, the process is time-sensitive.
Fortunately, many banks are ready to delay the foreclosure process so you can sell your house and settle all of your debt. The bank could save a lot of money by doing this because the foreclosure process is expensive for lenders. Additionally, it may spare them the trouble of trying to find a buyer for your house.
No matter when or how you decide to sell your house, make sure the proceeds will cover all of your debt to the lender. You’ll also need money to cover any penalties, interest, and fees in addition to the principal. You might still owe the mortgage company or bank the difference between the total amount you owe and the amount you received from the buyer if you can’t sell your house for a price that pays for everything. A”deficit balance” is the name given to this discrepancy. If the bank tries to recover this shortfall amount from you, they may do so by requesting a deficiency judgement against you from the court.
Given all of these factors, hiring a realtor is one of the best ways to sell your house prior to foreclosure. Although the commission paid to the real estate agent will be somewhat less than the benefits they will provide for you, you will still receive a little less money when the house sells. These advantages include:
- Adding a property to the Multiple Listing Service (MLS)
- Obtaining guidance on the most cost-effective ways to improve your home
- Getting suggestions on how to price your house to sell it as soon as possible and for the highest possible profit.
- If a short sale is your only option due to an underwater mortgage, you should negotiate with your mortgage lender.
- If you’re trying to sell your house during the pre-foreclosure phase, a real estate agent will be especially beneficial.
The Benefits Of Selling Your Home Before Foreclosure
Selling your home before the lender can foreclose on it has a number of advantages. You’ll first keep a foreclosure off of your credit report. Most foreclosures stay on a credit report for seven years, which could hurt your ability to get a loan in the future.
Second, you can purchase a new home much sooner if you decide to do so. For example, after a foreclosure, people who want to get a Federal Housing Administration loan must wait three years before applying. If a foreclosure appears on your credit report, many banks and other lenders will be less likely to offer you a mortgage.
Thirdly, if the money from the sale doesn’t cover all of your mortgage debt, there is a “deficiency balance.” In some states, the bank can get a deficiency judgement against you to get back the difference.
Fourth, it might help you sleep better at night. Instead of letting your lender control your situation while your home is being foreclosed upon, selling your home gives you a proactive way to address your situation.
Let’s sum it all up…
One of the best ways to prevent foreclosure is to sell your house. But before you choose how to approach the sale, you’ll need to take a number of factors into account. These include your overall financial situation, the amount of equity you have in your home, and any real estate conditions that might affect the fair market value of your house.
You can sell your house through a short sale or a regular real estate transaction if you decide to do so before the foreclosure process is over. You have other options, such as bankruptcy, loan modification, and refinancing, if neither is feasible or if you’re looking for a solution that allows you to keep your home.
