Behind on Mortgage Payments?
Here Are 5 Options to Avoid or Stop Foreclosure

Options of How to Stop or Avoid Foreclosure
Options of How to Stop or Avoid Foreclosure

The clock is ticking – after a lender files a notice that you are behind on payments, you will have a set period of time before your house goes to the foreclosure sale.  The earlier you act during this timeline, the more options you will have and the better outcome you will receive.  Be proactive – recognize your situation and act quickly.

To be able to act early, you will need to educate yourself on your options and on the current housing market.  We list 5 of these below, and it is imperative that you find out as much as possible about these different options and how they apply to your situation.   You do not want to lose thousands of dollars because you are unaware of resources available to you – get smart about the decision facing you.

Lenders are not in the business of owning homes – they are in the business of making money on loans, and quite often will have many programs designed for people in your situation.  Calling your lender and gaining a primary contact will allow you to keep the communication channel open and ensure that you receive no surprises as the process moves forward.

Your options will vary depending upon how much equity you have in your house.  However, even in a situation where you have no equity, you may still have options.  The key to understanding the true equity of your property is to first come up with an honest assessment of the total debt by totaling the full payoff of all the loans and liens on the property, including any property taxes, back payments or pre-payment penalties.  Then, you must assess the value of the property, usually by comparing the recent sale values of comparable properties in your neighborhood.  Then, you subtract your total debt from your estimated value, and you have the potential equity of your home.  Remember, if you sell through a realtor, the true equity will be your current equity minus all realtor commissions and closing costs, which typically range from 9%-15% of the total value of the property.

Our society is based on credit – foreclosure or bankruptcy can ruin it, and can stay on your credit history for 7 years or longer.  Foreclosure is one of the worst things to have on your credit report – it will prevent you from getting credit cards, buying cars, buying homes and more.  It is imperative that, during this time of difficulty and stress, you have a clear idea of what you would like your future life to be, and that you protect your credit by making sure that your property does not reach the foreclosure sale.

If you have significant equity and the ability to make new payments (typically at a higher monthly amount), you can sometimes re-finance.  There are many options and packages available from lenders to help, but you must watch out for lenders who are not familiar with properties going to foreclosure, as many times they will take too long to process your new loan and you may lose the property to the foreclosure sale.  If you decide to re-finance, make sure you work with a lender who specializes in properties in danger of going to foreclosure, and make sure you are careful to not agree to lines of credit or new payment structures that you cannot afford. 

If missing payments was a one time thing and you feel you can make them going forward, you may be able to create a work out plan with the bank.  Also know as a forbearance or loan modification, the work out plan will quite often spread the back payments out over a period of time, thereby increasing your monthly payment but bringing you out of the foreclosure process.  However, be cautious – if the circumstance that led to your first default still exist and you are not able to make the payments of your work out plan, the lender will quickly begin the foreclosure proceedings again, starting up from where they postponed it the first time.

You can stop the foreclosure process by bringing the loan current and paying off all back payments owed.  Typically, you will need a chunk of cash to do so, and borrowing money from a friend or loved one quite often can bridge the gap in a tight situation.  However, be advised that you will still have to make your monthly payments, and you do NOT want to put your friend or loved one’s money at risk by bringing the loan current only to default on it again in the near future.

If you are in a hot housing market and you feel your property would sell quickly, you may list your house with a local real estate agent.  However, there are drawbacks to working with a realtor during the foreclosure process. First, the real estate market may move slower than your foreclosure timeline, and often there is not enough time to find a qualified buyer and close escrow in time to save the property from foreclosure.  Also, realtors will charge between 5%-7% commission on the sale price, thereby reducing a portion of the equity in your home. 

There are many companies, like 7 Days Cash by The Sierra Group, LLC, that buy properties every day direct from homeowners.  By cutting out the realtor, we are able to save homeowners the commission and closing costs, and can typically close as quickly or slowly as the homeowner needs or wants, usually in 3 days or less. Or as soon as the title and closing company is able to close.  A Professional Home Buyer, like The Sierra Group, LLC will quite often also have a host of services that can help ease a transition, from credit repair and relocation services to quick cash and saving of your long term credit history.  However, there are many vultures in the investing world, and it is crucial that you work with a Professional Home Buyer that is up front, honest and will give you a fair price for your property.  

If the amount of debt on your house is more than the current market value, you may be able to sell your house with a short sale. A short sale is where a lender will accept less than the amount they say is owed on the house in order to get the house sold. We have worked with numerous situations where a short sale was needed to allow the seller to sell their house.

If you decide that selling your house to a cash home buyer is a good option for you, ensure that you are working with a “real” cash home buyer, and not just a wholesaler. A wholesaler will tie your house up and take weeks to find an actual cash buyer to close the transaction. This can cause big problems for you if you need to sell your house in a short time window.

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The Sierra Group, LLC is a professional home buying company who has been providing solutions for home sellers for over 25 years. We are Veteran owned and operated and have an A+ rating with the Better Business Bureau.