“How can I avoid foreclosure?” is a perfectly natural question to ask if you’re facing one. Few situations are as intimidating for a homeowner as receiving a foreclosure notice. Foreclosure is the drastic final action that is taken if you have missed several mortgage payments. It is the process by which your mortgage lender notifies you that you have until a certain date to get up to date on your missing payments. If that doesn’t happen, the bank will seize the home and resell it at auction in order to make up for the mortgage amount. Once that happens, it’s likely that you’ll have limited options (and time) when it comes to moving forward. Though it’s understandably scary, foreclosure is by no means your only option: it doesn’t happen overnight, and there are things you can do before a foreclosure is finalized to avoid the blow it will deal to your credit score and prospects. Today, we’re examining those options. Let’s get started.
Talk to Your Lender
If you have received a 30-day pre-foreclosure notice, this means that you have that amount of time to make up for the missed payments on your mortgage. If you’ve had your home for many years and were recently in a tough spot that resulted in the missed payments, but don’t have a track record of missed payments beyond that, it’s worth trying to get in touch with a representative from your bank. See if it would be at all possible to come up with a payment plan that is within your means. Though this isn’t the most likely option, it’s one worth exploring if you have a decent credit score and track record.
Consider Selling the House for Cash
More often than not, the 30-day pre-foreclosure notice from your lender will be non-negotiable. The idea of coming up with months’ worth of missed payments is daunting, if not altogether impossible, for most homeowners, but it does not have to mean that all hope is lost. In this scenario, a solid option to consider is selling your home for cash. This is a worthwhile prospect because:
- It is well within your rights to do so while the home is still under your ownership.
- Selling a house for cash means avoiding the expenses, time constraints, and uncertainty of a traditional real estate process.
- You can use the cash you get from selling your home to pay off your outstanding mortgage balance, which will give you a clean break to move forward without the major hit to your credit score.
Let’s explore each of these reasons a little more in depth.
It’s Still Your Home
So long as your house has not been foreclosed on, it is still your property. That means that you are well within your means to sell it, whether that’s to a cash buyer or in a conventional real estate process. Selling your house for cash is a great option, especially if you’ve built up equity in the property over the years. The more equity you have, the lower the amount you’ll have to pay your mortgage company in order to settle your loan (more on this later).
Avoid Time-Consuming Negotiations
There’s a reason we say “sell your house for cash” and not just “sell your house,” and that reason is time. When you receive a foreclosure notice, you have between 30 and 60 days to get everything in order before your house is no longer your property. The average conventional real estate process in Florida (where you’d list your home with an agent and field offers from buyers) takes about three months. During these three months, you’d have to undergo inspections for the house, go back and forth with closing cost and final price negotiations, and still run the risk of having the deal fall through at any time before closing. On top of that, you, as the seller, would be responsible for paying the real estate agents’ commissions and potentially other closing expenses. When you work with a cash buyer, none of that is an issue: no negotiations, no closing costs, no commissions, and no back-and-forth. When you work with a reputable cash buyer, you can close in whatever timeline works for you (at PlacePitch, we can have your deal done in as little as one business day).
You Can Break Even (or Better)
Let’s say the cash value of your home is about $150,000, and you’re about $10,000 behind on your mortgage payments. Over time, you’ve built up equity in the house and have about $50,000 (on top of that 10 grand) left to pay off. If you sell your house to a cash buyer, you could settle the amount you’re behind on, pay off the rest of your mortgage, and still have a decent cushion to give you options for the future. Of course, no two cases are the same: the amount of money you walk away with at the end of the day will depend on numerous factors, like how much your house is worth and how much you have left on your mortgage. However, it’s worth running the numbers to see if a cash offer could square away your expenses and give you a little padding to move forward with peace of mind.