Many people have high expectations when they think of buying a foreclosed property and saving lots of money. Lots of homebuyers think banks take back properties seized and sell them at auction for reduced prices. But that’s not usually the case.
Some might believe that they are getting the property for less because banks are eager to dispose of them. But there is more to foreclosure than meets the eye. Your dreams of a humble house with a white picket fence and blue shutters may be put on hold if you do not understand what kind of property you are purchasing.
What is Foreclosure?
Understanding foreclosure can help you make better choices when purchasing a property. Foreclosure is the legal procedure when the lender, typically banks, recovers the balance of the loan from a borrower, the property owner, who has failed to make regular payments to the lender through the sale of the loan collateral or an asset.
The bank does not own the property. Instead, it merely seized the property used as collateral to be able to get back the amount that the property owner borrowed from them. One of the ways the lender can recover the amount is to sell the property.
How to Avoid Foreclosure
Failure to keep up with monthly loan payments may result in foreclosure. If you plan on getting your property out of a mortgage, you must pay your creditors on time. You can avoid foreclosure with these tips:
Never neglect payments. Your creditor must be your priority. Do not ignore your payments. They placed their trust in you that you have the capability of paying them back. Do not break that trust, as you may not be able to borrow money from them again.
Do not ignore the problem. If you have difficulty meeting payment deadlines, do not ignore it. The farther out you are with your payments, the higher your chance of losing your property.
Speak with your creditor. Creditors do not want your property. They want to be paid in cash. If you are having difficulty in paying them, you can inform them. They have options that can help you get your payments back on track.
Respond to any correspondence with your lender. If your lender sent you a warning letter, contact them. Explain your situation to them so they can provide you with alternative solutions.
Control your spending. The way you allocate your money is up to you. However, if your property is on the line, it is best to control your expenses. You need to have a budget, and you need to stick to it.
Never let your property get foreclosed. You can avoid it as long as you meet your payment deadlines and pay off your debt.
What Can You Do When Facing Foreclosure?
Foreclosure takes time. It can last for two to 12 months, depending on your lender’s ability to act quickly, and the location where you reside. When you fail to keep up with your payments, your lender will be forced to file a Notice of Default, or NOD. If you are already facing foreclosure, you can try these strategies to stop lenders from taking your property:
Speak with your lender. Before the schedule of your property’s auction, you can still try to work out terms with your lender. You can ask for a compromise so you can get back on track with your mortgage. Lenders may offer you different payment restructuring schemes, and you can compare and choose one that will work for you.
Find ways to increase your monthly income. Consider ways to augment your income. Try finding additional freelance work or getting an extra job. Check your lifestyle and eliminate activities that cost money. If possible, you can sell items that you no longer need.
Try a short sale offer. Before your creditors schedule an auction for your property, you can try to offer them a short sale. This offer happens when you find a buyer for your property to pay off the loan amount. This option might be better than having your property foreclosed because you can dictate the price of your property. You may sell it for more than the loan amount. However, you must be aggressive in finding the right buyer.
File for bankruptcy. Bankruptcy puts a halt on foreclosure. Once you file for bankruptcy, the law prevents any debt collectors from continuing their collection processes. Since foreclosure is regarded as a form of collection activity, it will be stopped.
Try a short sale offer. Before your creditors schedule an auction for your property, you can try to offer them a short sale. This offer happens when you find a buyer for your property to pay off the loan amount. This option might be better than having your property foreclosed because you can dictate the price of your property. You may sell it for more than the loan amount. However, you must be aggressive in finding the right buyer.
Ask help from your attorney. Find a lawyer like the ones here that has experience with foreclosure cases. He or she has the expertise that can help you with your situation. Your attorney will provide you with the necessary documents and steps to avoid foreclosure.
As a borrower, you must pay your lenders. Failure to meet payment deadlines regularly will result in foreclosure. If you want to avoid having your property seized, you need to find ways to pay back your creditors.
Cecille Cunningham
Cecille Cunningham loves writing for the common reader, especially helping them make sense of various topics of law. She currently writes for multiple law firms. In her spare time she cooks for his family and friends.