No matter what the circumstances, losing your home to foreclosure is a devastating experience. From the profound impact on the lives of your family members to the scramble to find a place to live, the real-world implications of the foreclosure process are as long-lasting as they are profound.
While nothing can blunt the financial and emotional devastation of going through the foreclosure process, there are things you can do to prepare yourself and your family. Hopefully, you have already tried everything you could to save your home, from trying to negotiate a short sale to talking directly with the lender. If not, those steps should be your number one priority. But once you have gone through the process and are still facing a foreclosure, it is important to know what to expect going forward.
The housing crisis may be over, but foreclosures are still happening every day. Whether the root cause of the foreclosure is a sudden job loss, a lack of savings or a huge medical bill, the results are still the same. The process of foreclosure is also largely the same, although there are a few variations depending on the exact circumstances and the policies of the lender.
Homeowners who fall behind on their mortgage payments will typically receive formal notices from their lenders. The initial notice of default is the first step toward formal disclosure, and at this point, homeowners who hope to save their properties should contact their lenders.
Assuming that the homeowner is unable to catch up on their payments and bring them current, the foreclosure process will proceed. If the financial situation that precipitated the missed mortgage payments was a minor or temporary one, the lender may be willing to make some accommodations, including stretching out the repayment plan or lowering the interest rate.
In those cases, the homeowner and the lender may be able to come to an agreement – one that will stave off the foreclosure and allow the owner to remain in their home. Many lenders have special programs to help homeowners avoid foreclosure, including accommodations for permanent disability or the death of the primary breadwinner.
If the homeowner is unable to reach a settlement with the lender and remains in default, the bank will initiate the formal foreclosure process. In these cases, the bank will file the necessary paperwork to start the foreclosure process, and the homeowner will need to make preparations to leave the property.
The amount of time the foreclosure will take will vary from state to state and from property to property. In expedited cases, the foreclosure could be completed in a matter of a month or two, while other cases could stretch out for many months or even a year or more. If you are facing foreclosure, it is important to do your homework, understand the laws of your state and know your rights under the law.
Facing Foreclosure? Explore Potential Alternatives First
The loss of a home is devastating, both financially and emotionally. Losing your home to foreclosure is a huge financial blow to be sure, but it also means uprooting your family, finding a new place to live and starting off from scratch.
Suddenly your dreams of homeownership are gone, and recovering from the financial and psychological blow can take years. If you are facing foreclosure, you need to do everything you can to avoid the process. Even if you do not succeed, you will know you have done everything in your power to protect your property, your family and the roof over your head.
Depending on your situation, these alternatives to foreclosure may or may not be applicable. Even so, you owe it to yourself and your family to explore them and look for a better path forward.
Renegotiating with Your Lender
The good news is that most lenders are reluctant to enter into foreclosure proceedings. Those lenders know that selling a home in the foreclosure market will take some time and that they may not recover the full value of the property.
If you are facing foreclosure, you may be able to use that reluctance to your advantage. Negotiating better terms on your mortgage, including a lower interest rate, is one possible way to avoid the loss of your home. In other cases, you may be able to extend the length of your mortgage, which could lower your payments and make your home more affordable. This renegotiating process is not always successful, but it should be the first strategy you employ.
Considering a Short Sale
If you are facing foreclosure, you may also be able to negotiate a short sale. In a short sale, the bank agrees to accept less than the amount owed on the property, giving you a fresh start and allowing you to stay in the home without the threat of foreclosure.
Short sales do have some financial implications, including potential taxes on the amount of mortgage forgiveness. Even so, negotiating a short sale could be an excellent way to avoid foreclosure, especially if you have run out of other options.
Renting Out Space in Your Home
It may not be ideal, but renting out extra space in your home could give you additional income – money you can then use to bring your mortgage payments current and avoid foreclosure. Depending on where you live and the type of home you own, this may or may not be a viable strategy, and you will need to do your homework before moving forward.
If you are lucky enough to live in a tourist area or near a big city, you may be able to rent extra space on Airbnb or a similar short-term rental service. Once again, you will need to research local laws and make sure you meet the criteria, but the extra cash could come in handy if you are facing foreclosure.
No one wants to lose their home to foreclosure, but a sudden job loss or unexpected expense could leave you financially devastated and unable to make the mortgage payments. If you find yourself in such a situation, you owe it to yourself to explore all of the alternatives before you give up and abandon your dreams of homeownership.
Protecting Your Home from Foreclosure: How to Negotiate a Short Sale with Your Lender
Falling behind on the mortgage is one of the most frightening things that can befall a homeowner. Whether the cause of the delinquency is a sudden job loss, an unexpected expense or a health crisis, the fear is much the same.
Homeowners know that they can only miss so many mortgage payments before the bank comes calling, and when they do, they are likely to start the foreclosure process. Worse yet, the foreclosure process can move with surprising speed, leaving those impacted with little time to plan.
Unfortunately, many homeowners remain in denial about a pending foreclosure, wasting precious time and leaving them with few options at the end of the day. The threat of foreclosure may be frightening, but ignoring the situation will not make it any better. If you have fallen behind on your mortgage and are now facing foreclosure, you need to take some proactive steps to protect your home and the investment you have made.
In many cases, negotiating a short sale could save your home from foreclosure, allowing you to remain in the family and avoid the disruption that would otherwise impact your family. Negotiating a short sale is not always an easy task, but it could be the last best hope to save your home.
If you are planning to negotiate a short sale with your lender, it is essential to do your homework and research the track record of the financial institution holding the mortgage. In a short sale, the lender agrees to accept less than the amount of the outstanding mortgage, and some lenders are more willing to do that than others.
Ultimately, you do not have much control over the policies of your mortgage lender, but by doing your homework, you will at least be better prepared. Talking to other homeowners who have successfully negotiated short sales with your mortgage lender can help a lot, and the internet makes it easy to reach out to those with first-hand experience.
Once you have gathered as much information as you can, it is time to contact the lender directly. It is always going to be hard to pick up that phone, but the sooner you act, the better off you could be. Time is of the essence when fighting foreclosure and negotiating a short sale, and a proactive approach is always the best way to proceed.
It may take some time to work your way up the chain and find a real decision-maker – someone who has the power to approve the short sale you are seeking. Once again, your online research could come in handy, helping you identify those key decision-makers by name. Once you know who you are working with, you can start negotiating the short sale.
To successfully negotiate a short sale, you will need to show the lender how the process can benefit them as well as you. The lender already knows that a short sale will help you, but demonstrating the advantages for the bank is even more critical.
Some external factors can help, or hurt, you in this regard. If the housing market is strong and properties are selling with lightning speed, you may not have much in the way of negotiating power. If, on the other hand, the housing market has weakened substantially, the lender may be far more willing to work with you.
Negotiating a short sale is not an easy thing to do, but when you are facing foreclosure, it is indeed worth a try. A short sale may be your last chance to save your home, so you need to do everything you can to protect yourself, your family and your property.
