KNOW YOUR FORECLOSURE OPTIONS:
OPTION 1: Sell Your Home on the Open Market – It is most likely that you are in a ‘short sale’ scenario where it’s critical to engage someone who knows the system to represent you. A ‘short sale’ is simply when the bank and/or other lien holders on your property are asked to release their lien for LESS than what is owed to them. That’s it, and while it may sound simple the particulars are best handled by someone with experience. This is probably the best option available to you and will end the foreclosure without a court ordered auction. A short sale is far less damaging to your credit than a finalized foreclosure action.
OPTION 2: Private Auction – Why would you voluntarily auction your property? Why not? In a private auction, you decide if you want to accept the highest bid. This is something which we have done before. We usually provide the buyer with a home inspection report and give them a typical time frame to close. The buyer signs a standard contract but it’s NOT contingent on inspections or financing. What is notably different is that in this scenario the buyer pays the brokerage commission in addition to many other expenses typically paid by the seller, such as title insurance and documentary stamps on the deed. This option requires time as well, as the auction process is futile if we don’t have enough time to market it and get buyers there.
OPTION 3: Sell your home to Investors – If efforts to save your home have been unsuccessful and time doesn’t permit selling your home on the open market or you just don’t want to, but want a quick sale with no problems, call us. We work with investors who will make you a cash offer and close quickly usually in a week or so. If you need additional time to relocate, that can easily be arranged.
OPTION 4: Loan Forbearance or Modification – The loss mitigation department of your mortgage company may make arrangements with you to pay some of the back payments now and the balance within a certain time period. A typical example – You owe $9,000 in back payments, attorneys’ fees, etc. Your mortgage company may accept $4,500 now and $750 per month for the next 6 months. Of course, you would have to resume making your normal monthly payments. Or, a loan modification which is a permanent change to your mortgage that may lower your payments and the delinquent payments may be added to the mortgage balance. A loan modification or forbearance is easier to arrange prior to the Mortgage Company filing a foreclosure lawsuit. Some lenders will not consider this after filing, but it’s worth trying.
OPTION 5: Reinstate Your Mortgage – You have up to and including the morning of the auction to catch up your payments. Perhaps you could borrow from friends or family, credit cards or retirement program. You may be able to arrange a second mortgage to catch up the back payments and fees. Check in the Yellow Pages under “Mortgages”. There are a number of companies listed that claim they can help in these situations.
OPTION 6: Refinance – You have probably received letters from mortgage brokers and lenders saying you are already pre-approved for a new mortgage. The fact is that it’s very difficult to arrange new financing when you’re already in default on your existing mortgage. Be very cautious about sending advanced fees to lenders or mortgage brokers. Usually it’s a ploy to take advantage of your financial situation. Arranging new financing will depend on your income, credit report, value of your home and the amount of your equity. If you’re not sure of the value of your home, give us a call. Usually we can give you a fairly accurate estimate of value within a day. We would be glad to help and of course, and there’s no obligation. If you attempt to refinance, you should always have a back-up plan and this is why we advocate a multi pronged approach.
OPTION 7: Chapter 13 Bankruptcy – A viable alternative if your financial situation has improved, filing bankruptcy prior to the auction will stop the sale. Unfortunately for most people, it only postpones the sale for one or 2 months. Immediately after filing a Chapter 13 Bankruptcy, you will have to file a repayment plan with the courts. This plan has to show that you have sufficient monthly income to pay basic living expenses such as food and utilities and other monthly payments such as credit cards, car payments etc. In addition, your income must be sufficient to resume making your monthly mortgage payments. All past due amounts are usually spread out between 24 and 60 months i.e. if you owe $9,000 in missed payments, attorneys fees, etc. if spread out over 48 months would be an additional $187.50 due each month to the court appointed trustee. If you feel as though you have the income to immediately begin repayment of all your debts and the courts agree, this may be a good choice for you to save your home. Bankruptcy should be considered an action of last resort due to it’s affect upon your credit rating. Also, Chapter 7 Bankruptcy where the court appoints someone to collect all the non-exempt assets, sell them and divides the proceeds among the creditors. For more information on bankruptcies, please see…
OPTION 8: Deed in Lieu of Foreclosure –If efforts to sell your property on the open market have been unsuccessful, you could deed your property over to the bank without the hassle and time of them going through the foreclosure process to the end. And, you may be able to negotiate something with them to limit the damage. When people speak of mailing their keys to the bank, this is what is meant.
OPTION 9: Let Your Home Be Sold On the Courthouse Steps – By far, the worst option available to you! Many people feel “I have no equity, let the bank take it”, but homes that are sold by the courts typically sell between 50% and 70% of their fair market value. Moreover, if a bank suffers a loss due to the pending foreclosure action against you, they also have an option. They can file a deficiency judgment against you and pursue you for the amount of their loss. Or, simply forgive the debt owed in part or in full. This is known as discharge of indebtedness, or DOI and it MAY BE a taxable event. Recent changes to this law are complex and we suggest you speak to an accountant. Typically, about ten days after the foreclosure auction, a certificate of title will be issued by the courts to the new owner. If you have not voluntarily vacated your house at this time, you could be forced to move out within 24 hours.
If you have any questions in regards to these options, please call me. I am Licensed Mortgage Broker, as well as a Licensed Real Estate Broker in Florida. If I can help, please call me sooner rather than later at 561-818-3585.
The last piece of advice I have is to be proactive in addressing the foreclosure suit. Respond to the letters your lender is sending you in a hand written format. Call the lender and try to work something out. Go to the court dates and ask the judge for more time. Show him that you’re working on resolving the problem. Call a Mortgage Broker. Call a Real Estate Broker. Do not let time go by without doing something.