Millions of Americans have faced the dreadful reality of losing their homes and moving their families because of massive debts and circumstances beyond their control. Perhaps you’re having trouble making ends meet because you or a family member have lost a job, or you’re having other situational distress problems. If this is you, it’s time to fight back!

Knowing your options may stop foreclosure proceedings, help you keep the roof over your head a lot longer, save your property outright or prevent a foreclosure on your credit report.

A home is the biggest investment most people make during their lifetime. More than just a financial transaction, a home is the center of family life. From kitchen countertops to the wallpaper in the kids’ bedrooms, your house is such a part of your life that if you are faced with losing it, you feel overwhelmed and helpless. But you are not. There are solutions and alternatives to foreclosure.

Contact your lender & find alternatives to bring the loan current

If you are behind with at least one payment and possibly at risk for missing several, putting you at risk of foreclosure, reach out to your lender immediately! Lenders are in the business of making money on interest. Not to foreclose on you. Lenders don’t want to manage properties. It will cost them 10’s of thousands of dollars to maintain repossessed houses.

According to the FDIC, most homeowners in foreclosure have no savings and no available credit. And since the number one reason for foreclosure is due to job loss, there may be no way for the homeowner to catch up on the loan. However, if the homeowner is struggling with a foreclosure, but has the reasonable expectation of income coming in the near future, it may benefit you to talk to an extended family member about a short-term loan. Getting a roommate to offset expenses, selling valuable items and/or getting a part-time job are other alternatives to bring the loan current.

Loan modifications

According to a Freddie Mac / Roper Poll, most homeowners fail to contact their lender because they are embarrassed, don’t believe the lender can help, and/or believe it would cause them to lose their home more quickly. However, this option may be a viable one. Loan modifications occur when the bank agrees to reduce the principal, interest, and/or payments. Unless you have experience with the Loss Mitigation Dept. at banks, we recommend working with a legitimate and experienced loan modification company who can prepare an effective argument for the lender.

As stated earlier, the number one reason homeowners are in foreclosure is due to job loss. If income is not coming in from a traditional job(s), then there is little chance the lender will reduce your loan principal, interest rates, or payment.

Forbearance

Forbearances are when the lender allows you to delay your payments or spread your back payments over a specified number of months until you have caught up. Again, if you have a reasonable expectation of revenue coming into your household within a certain number of months, then this may be a solution for you. However, keep in mind that until your past amounts are current, you will have a negative mark against your credit, even during months when you are paying more than your requirement. Also, some programs may allow the banks to immediately foreclose on you if you fall behind on payments again. Read the agreement you receive from the bank diligently and weigh up the pros and cons very carefully.

Deed in Lieu of Foreclosure

According to Nolo.com, with a deed in lieu of foreclosure, you give your home to the lender (the “deed”) in exchange for the lender canceling the loan. The lender promises not to initiate foreclosure proceedings, and to terminate any existing foreclosure proceedings.” This option, if accepted by the bank, is a quick and easy way to walk away from the house, doesn’t require a sale, and may look better on your credit report than a foreclosure. This is a less expensive option for the lender compared to the foreclosure process. This process will not work if you have multiple liens on the house.

Bankruptcy

This option is widely misunderstood and possibly the worst option for homeowners. Bankruptcy will only pause a foreclosure, not eliminate it. Most lender agreements state that if the property goes into default, the lender will take back the property through foreclosure. Then, you will have both a bankruptcy and foreclosure on your credit history for the next 7-10 years. Plus, you may still be required to work out a repayment plan for the house. Seek legal counseling prior to deciding on a bankruptcy.

Short Sale

A short sale occurs when a third party negotiates with the mortgage company to accept a discount on what is owned and releases their interest in a property in exchange for a cash payment. The seller is not allowed to financially benefit from the transaction. For a short sale scenario, it is better to utilize the services of an experienced short sale Realtor or real estate investor. Most lenders require the house to be listed with a Realtor before they will consider a short sale offer.

Some of the drawbacks of a short sale are similar to a foreclosure, as your credit score will be negatively impacted (but not as bad as a foreclosure on your credit report) but you may be able to purchase a house again within 24-36 months after the short sale is complete. Also, you may be sued and taxed as well, although if you have a knowledgeable investor working your short sale, he or she can negotiate with the bank a “satisfaction of the loan’ result, meaning that the accepted short sale would satisfy the loan and no remedies would be needed.

Sell your house before the auction

If you decide to sell your house before the auction date, you will keep whatever equity you still have invested in the home. Selling your house for “all cash” to a credible and reputable real estate investor is possible if there’s enough equity. It may be hard to sell your home on such a quick turnaround, but it’s definitely possible, especially with the market heating up. You will lose your equity if your house is sold at auction.

If there isn’t enough equity for a cash sale, you may consider a non-traditional sale. Selling your house “Subject to the Existing Financing” is a non-traditional sale. The real estate investor who will buy this method will make up your payments in arrears, continue to pay the existing mortgage and all associated bills with the house until the house is paid off. Benefits include avoiding foreclosure and improving your credit. We suggest you contact a Real Estate Atty. for advice to answer any questions.

Time is money and it is not on your side when you are facing foreclosure. Contact us today at 214-306-9740 or reach out to us on our website at contact us. We’re available to help!

Reddtrow Properties, LLC. are not attorneys, nor are we giving legal advice. We’re experienced real estate professionals familiar with the options to avoid foreclosure.

Disclaimer: This information should not be considered legal or financial advice. You should consult with an Attorney or financial professional to determine what may be best for your individual situation.

Author: Sandra Nesbitt