Are you facing a financial burden and wondering, “Can I sell my house before foreclosure?” The day that you signed your mortgage agreement and received the keys to your new home probably stands out in your mind as a day that you accomplished one of the biggest milestones in your life. It was one achievement, in particular, that would define the beginning of a brand new chapter for you.
You were excited to move your family into a good home, to have more space, live in a nice neighborhood, and possibly get your children into a good school district. And on top of that, you could host friends and family and share your new space with them as well.
However, life doesn’t always go as planned or as you had hoped. Through a series of events that could be out of your control, your finances have taken a serious hit. Maybe you or a loved one have been injured or fallen ill, and your insurance won’t adequately cover your medical expenses. Or, you’ve lost your source of income and are struggling to make ends meet and pay the bills on time.
Whatever the case may be, you are in a situation where you cannot keep up with your current mortgage payments, and you have no way of solving this issue any time soon. Your lender has made several attempts to collect the money owed, along with late fees, but getting paid up-to-date with them is just not feasible for you. Now, your home has unfortunately gone into foreclosure.
For any property owner, this can be one of the most challenging dilemmas they ever have to endure. Moving into your home was a happy and exciting time full of so many new possibilities for you and your family. But, now you have to sit back as all of that joy and hard work is stripped away from you, and it’s heartbreaking.
You likely spent a significant amount of time looking into your options and wondered if it was possible to sell your home before foreclosure. The short answer to that question is, yes! You absolutely can. However, there are a few things you need to understand before you can sell your home, such as:
What is a Foreclosure?
Foreclosure is a legal process where a lender seizes and then sells a property after the borrower could no longer continue making payments on their mortgage. This action happens due to you, the loanee, having missed several mortgage repayments and not making any other plans with your lender on how to pay back the mortgage.
The foreclosure process typically varies from state to state, but the outcome is usually very similar. During the pre-foreclosure period, the lender will try to find ways to get you to pay for the mortgage and avoid foreclosure.
Once the lender takes back this property, which typically happens after the borrow falls a few months behind on their payments, they will sell the home in an attempt to recover the money owed to them from the defaulted loan.
In essence, a mortgage is a long-term loan. Like with any loan, there has to be a form of collateral used to help recover the amount of the loan should the loanee no longer be able to pay it back. When you sign for a mortgage, you have the opportunity to buy the house you want, but that same house is also the collateral that you use to obtain the loan itself.
When you purchase a home, ownership is viewed in terms of equity. You and the lender both have equity in the property, but the lender will have more equity than you. As you make payments on the mortgage over time, you start to gain a greater amount of equity in the home.
However, the unfortunate has happened, and you cannot keep up with the mortgage payments anymore. Your lender now has to recover the amount they lent to you, and since the loan was for your home, it becomes the collateral for the lender to use to recover the debt you owe to them.
What Are the Different Types of Foreclosures?
The type of foreclosure a lender will initiate depends significantly on the state the home is located in and the communication you’ve had up to this point. In general, there are two types of foreclosures:
- Non-Judicial Foreclosures
This type of foreclosure is most common in states that have legislation for a deed of trust. The deed of trust will usually contain a clause that allows the lender, or a third party, to use your property as security for a debt that you owe. With this clause, they can initiate foreclosure proceedings without having to go through a court of law.
Before beginning proceedings, the lender will first attempt to ascertain the kind of position you are in and help find a solution to how you can begin to pay back the mortgage. At this point, it would be best to get yourself a lawyer or a HUD counselor to represent you during any of these discussions.
If there is no forthcoming action, the foreclosure process will begin when the lender files a notice of default with the clerk of the county where you reside. This period may vary from state to state, but an average of 30 days is typical after discussions began and you could not reach a solution.
After this period has lapsed without any further action taking place, you, the loanee, cannot stop the foreclosure from moving forward. After some time, the lender will then put up a notice of sale, which will typically include the date and time that the sale of your property will occur.
The foreclosure period varies from state to state, but some can take as little as 120 days, whereas others have gone up to three years.
- Judicial Foreclosures
Judicial foreclosures typically take place when a borrower owes a large amount in repayments and outstanding principal amounts. Lenders will often avoid going this route unless it is absolutely necessary, but when they do, they will submit the issue to a court of law. This type of foreclosure is usually an expensive and time-consuming process that can sometimes take years to conclude.
With judicial foreclosures, the court will usually appoint a referee who will conduct the foreclosure auction at the courthouse after a judge grants the order for the property to be put up for sale.
Unlike a non-judicial foreclosure, you still have the opportunity to pay the amount you owe right up to before the sale of the property takes place. If your house is sold and the amount is less than what you owe, the bank will be granted the right to come after you for the difference. This additional form of action is known as a deficiency judgment.
In some states, you also have the right to buy the property from the winner of the auction up to one year after the house was sold, known as a right to redemption.
Can I Sell My House Before Foreclosure? How to Sell Before Foreclosure
Foreclosure is a process that can take quite some time before completion, and in this time, you have a variety of options available to you to help you get back on track with your repayments. Although some of them may look attractive, a home sale is usually one of the fastest and least stressful options.
Here are a few tips to help you sell before foreclosure:
- Avoid Traditional Methods
When thinking about selling your home, the immediate thought that might come to mind is to hire a real estate agent. While this is often a good idea in most scenarios, it doesn’t apply well to this case.
You are selling your home because you are cash strapped and need to pay off your debts. The large commissions that a real estate agent will take will put you a bit further away from your target of repaying the debt.
Also, considering the market you are selling in, your house may sell for much lower than what it is worth, which in itself may be lower than the amount you need to pay back. You may simply not be able to afford the agent.
Using the services of a real estate agent will also mean having to wait until they find you a buyer. Typically this wait can be anywhere from three months to a year, and that’s in a good market. However, if the area you live in is currently facing a depressed real estate market, it may take you even longer than a year before you find a buyer for your home.
- Act Before Your Lender Does
If you are currently facing bankruptcy, it would be best to get ahead of the issue and sort the debts out before the lender comes after you. Once a lien is placed against your property, you will not be able to sell it.
Instead of waiting for that foreclosure notice to arrive, you can put your home on the market well in advance. The typical time it will take for a home to find a buyer is around six months. Planning in advance will allow you to secure a buyer before receiving a foreclosure notice.
- Sell Your Home Before Time Runs Out
This option will be dependent on the liens that have been placed against your home by the lender. If it is just the one, then even if you are in foreclosure, you technically still own the house you are occupying.
The typical duration for the sale of a home in foreclosure can range from six months to two years, so you still have a chance to repay your debt before the auction date arrives. With this in mind, you could potentially sell the home and settle your debt before the auction date.
- Ask for a Loan Modification
A home ends up going into foreclosure where there’s no way forward for the borrower to continue paying their mortgage, and the lender needs to secure the money that they are owed. But, what if you are in a position to pay back what you owe, just not on the terms that were initially determined in the loan agreement?
There are ways in which you can restructure the loan you are supposed to be servicing. One option you have is to ask for a forbearance, which would suspend payments temporarily to allow you to get back on your feet. A forbearance works best for short-term financial difficulties. If no solution is forthcoming, then you can choose to sell the home.
You can also ask to restructure the loan to help reduce the payments you make each month and spread the payments that you missed out over time. It might take you a little bit longer than projected to clear the loan, but you won’t lose your house in the process. Even so, you could still choose to sell your home and start fresh if need be.
- Conduct a Short Sale
Having a sit-down conversation with your lender could open up a few different avenues to help you avoid foreclosure. One of these options could be through a short sale. Lenders typically dislike dealing with foreclosures since they will have to encounter many legal and financial issues, along with potential PR nightmares that could blow up.
A lender who is willing to listen and help you find a solution will jump on board with the idea of a short sale because it allows them to bypass all of the paperwork that comes with a foreclosure. While still not the best scenario for a lender, a short sale is a much better prospect than losing time and money in seizing and selling property.
Whether you’re slightly behind on your mortgage and late payments are beginning to pile up, or your lender has already threatened foreclosure, we can help! At Quick Home Buyers NJ, we save you from wasting precious time and money trying to find a qualified buyer and never charge commissions, fees, or closing costs.
We understand that you’re going through an extremely stressful and difficult time, and our goal is to relieve you of this property that’s become such a heavy burden. Let us help you sell your house fast for cash and avoid foreclosure!