Tuesday, 23 July 2013

Demystifying The Foreclosure Process

Unfortunately, the economy hasn’t fared well in recent years, causing many to lose their houses due to foreclosure. Regardless of what caused a homeowner’s backed payments, how things move forward after such is pretty solidified. Before pre-foreclosure ever begins, the bank will attempt to settle debts with you, even sometimes negotiating a lower interest rate or monthly payment. If you cannot meet in the middle, and you default repeatedly on your mortgage, the bank will file a notice with the court that you haven’t paid them. This is called a public default notice. This is what starts the process of foreclosure. From that point on, the pre-foreclosure process is engaged and it becomes slightly more difficult to prevent the bank from seizing your home, but not impossible. 

Essentially, this time is a temporary standstill when the bank begins paperwork to put your home into foreclosure, but also gives you that time to try and come up with the money to pay what is due. Homeowners should take the notice of default as a serious warning. If they do not begin making payments on their home again, they will lose it to the bank, and all equity paid into it too. While some state regulations permit up to six months for a pre-foreclosure period, others are as short as three months. There are still steps that can be taken to prevent foreclosure though.

Should you be able to gather up the funds required to pay the past debt and bring your mortgage up to date, then the house will be released from the pre-foreclosure process. If the amount due isn’t very large, you might want to consider a credit card or small personal loan to cover the costs. Additional reasons for pursuing these avenues are plausible as well, such as a change in circumstances caused by temporary unemployment or unforeseen emergency expenses. That being said, if the homeowner is still unemployed, with no promise of employment in the immediate future, then destroying your credit with an unpaid credit card or personal loan isn’t going to help matters. If refinancing is an option, that’s often the best choice. Requesting a short sale from the bank is a common tactic in today’s economy too. 

Another alternative for homeowners is attempting to sell the house. This can often mean taking an offer that is beneath what you owe for the house, frequently at auction, but it will still get you closer to being out of debt and maintaining your credit than a foreclosure will. You can attempt selling it on your own as well. Many people jump at the chance to buy discounted pre-foreclosure homes. You want to rely on bankruptcy as a last resort, not an escape plan. Nobody ever desires going through foreclosure. It is advisable that you do what you can to prevent the process entirely, but should you find yourself in a pre-foreclosure situation, know that you’re fate is not yet sealed.

… written by Darian Cochran is the Principal Broker and CEO at Avenue Realty, LLC. Darian informs his customers by writing for a variety of real estate blogs and mortgage financing websites. You can check him out on Twitter or Facebook.

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