One out of every 200 homes faces foreclosure. There are numerous reasons why, but if it happens to you, it’s important to know that you have options. You may be able to apply for a loan modification, pay off the debt, or file for bankruptcy. In many cases, you can also sell the home before the bank seizes it.
When Does Foreclosure Begin on a Home?
Foreclosure occurs when the bank seizes the home. However, before that happens, there’s a period known as pre-foreclosure. This typically occurs after your fourth missed mortgage payment.
When you receive your first notice of delinquency, you’re in pre-foreclosure. This notice formally acknowledges that you’re behind on your payments and warns that your home will be seized if you don’t make the payments within a specific timeframe.
You have a few options if you don’t want to let go of your home:
- Pay what you owe. You have the right to make the payments and stop the foreclosure process until the home is sold at auction.
- Restructure your loan. Depending on the lender and your circumstances, you may be able to restructure your loan so that the debt is paid gradually over time. Contact your lender and explain your situation.
- Refinance your home. Refinancing is similar to restructuring in that it allows you to modify your loan. However, when you refinance, you can use your home’s existing equity to cover the debt. In order to pursue this option, you’ll need to have some equity in your home.
- Request forbearance. In some cases, the lender may even allow you to temporarily suspend payments, such as if you’re waiting for a new job to begin.
- File for bankruptcy. Bankruptcy won’t make the foreclosure go away, but it will temporarily suspend the foreclosure process and buy you some time to acquire the money.
If none of these options are ideal, your best bet is to sell the home during pre-foreclosure. The pre-foreclosure process usually lasts 3 to 6 months. If you don’t take action within that time, the home is seized.
Can I Sell My House if It’s in Foreclosure?
The pre-foreclosure period is actually the best time to sell if you know you’re facing eviction. If you know you won’t be able to make the payments, you’ll usually want to start the listing process on your home immediately. This will help you to preserve your credit score and potentially even recoup some of your home’s equity—as long as the mortgage is above water.
If the home is underwater (meaning that you owe more than the property is worth), you may have to request the bank’s permission for a short sale. This means you agree to sell the home as-is for less than what it’s worth and use the balance to pay off the mortgage. The bank will take a loss, but lenders are often open to this option because it amounts to an amicable resolution. In addition, the bank can use the loss as a tax write-off.
If you do decide to sell, get started as soon as pre-foreclosure begins. You have a very limited time to complete the sale, and once the bank seizes the home, you’re out of luck.
Once the home is sold at auction, you forfeit all rights to the property. In many states, including California, you do have a “statutory right of redemption.” This means that you have the right to reclaim the home if you’re able to pay the foreclosure sale price within one year of its auction. However, you’re looking at a significant price tag.
If you don’t think you’ll be able to find a buyer within the pre-foreclosure period, you can ask your lender to postpone the foreclosure as you look to complete the sale. But again, this must be done before the bank seizes the home.
How Can I Sell My Home Before Foreclosure?
Ultimately, the question isn’t “Can I sell my house if it’s in foreclosure?,” but rather how. With foreclosure, a short sale is usually your best option. That’s where real estate investors come in.
A traditional home sale with a Realtor can take 3 to 6 months or longer, and that’s time you just don’t have. On the other hand, a real estate investor will pay you cash for your home and have you out in as little as a week.
When you work with an investor, you’ll typically earn less than the full market value of your home. However, the transaction is quick and easy, and you’re able to move on with your life without the personal trauma and financial consequences of a foreclosure.
- If you owe more than the value of the home, speak to your lender before listing. If you sell your home for less than you owe and you’re not approved for a short sale, you’ll still be responsible for paying the difference. Your credit score might also suffer.
- If you have some equity in the home, you can initiate the sale without the lender’s approval and possibly even walk away with a bit of cash in hand.
If you’d like to learn more, contact Get Fair Home Offers. We buy houses for cash in Los Angeles, and we’ll make an offer on any home regardless of its condition. We know that time is of the essence, so we’ll provide you with an offer in as little as 24 hours and purchase your home in as little as 7 days.
Contact us today to get started, and take control of the foreclosure process.