Foreclosure Truths and Consequences
If you are actively trying to keep your house from going on the auction block but are losing the fight, you need to look at the options that might stop foreclosure. Refinancing is the option that most homeowners attempt first but in todays upside down world that might not be a workable option.
In the good days YOU had to qualify. Now it’s your HOUSE that needs to qualify. If you owe anything near the current appraisal price, you’re toast. In today’s market a homeowner needs to think outside the box to save his or her home and credit.
First things first, the home in danger of foreclosure MUST be listed for sale. Selling to avoid a foreclosure is always better than the foreclosure. Did I say ALWAYS? Now the words of caution.
Almost every real estate agent will tell you that to get the very best price “you need to fix it up a bit!” Well that may be true but if you’re in foreclosure you are probably in other financial trouble too. This is not the time to go further into debt or to borrow from the relatives. If the market is depressed in your area, $10,000 in fix ups will make little difference and there’s a good a chance that it will still not sell.
I know every real estate agent in America will probably disagree with me and I know there is some validity to their thoughts. But here’s the point I will make: since I will make nothing from the sale of your house and they will, who’s impartial?
Another option is to try and work with your lender to arrange a short sale. A short sale is where the property is sold for less than what is owed on the loan. A short sale will pay off the loan and will do more to save your credit than the damage a foreclosure would have done.
Next stop if unsuccessful with the short sale is to ask your lender about giving you a deed in lieu of foreclosure. This is the “Give it Back” plan. The best part of this plan, if accepted, is that you are free of the debt. The mortgage company agrees to accept the deed instead of foreclosing on your home. You still lose the house but that was happening anyway. Time to move on!
It is always suggested that you check the Internet for foreclosure rules for your state. Some states allow a lender to continue collection activities after foreclosure by suing for a deficiency judgment.
The reality is that very few lenders sue for deficiency judgments. They know your financial situation and pursuing you would be more wasted money. Having said that I know of one major bank that seems to pursue everyone for every penny. It is probably to maintain a reputation as being hard on bad debts.
Being diligent and following through with all your options will benefit you in the long run. Do the research and make the calls. It’s your life and your credit. And more times than not, your lender does care about you and your situation.
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