The 4 Keys to Avoiding Property Foreclosure
A property foreclosure can be painful and is certainly something you want to avoid. Through our extensive work with property owners and turning around distressed properties we have found that there are # keys to avoiding foreclosure. We are going to share these with you now, but first, how does it happen?
The steps of foreclosure
In usual practice, foreclosure occurs in three uniform steps. While some lenders – banks, personal loan companies or financial institutions – may use different words for each of these stages, the process is normally the same.
Notice of Default
In Orange County it is usually the city officials that are informed by the bank when a property owner has failed to make the scheduled payments. A ‘reinstatement period’ is usually given to the owner in the form of a letter. This letter outlines for you, the property owner, how long you must get the payments back in good order and how much should be paid. The letter to the owner will state clearly that foreclosure may occur is the payments are not brought back into line with the loan agreement. The reason we say ‘may occur’ is because lenders do NOT want to foreclose of a property. It takes time, money and people to foreclose on a property. Copies of the letter are given to the city officials as well as the property owner.
Notice of Sale
After a period of (usually) three months the owner is notified that the property is going to be sold in a ‘foreclosure’ where the funds from the sale will pay of the outstanding loan. The owner is informed by the Notice of Sale and once this happens, there is still time for the owner to speak to the lender, but it must be done fast and the funds to clear the outstanding payments deposited in the lenders account without delay. The Notice of Sale is very serious. Is the sale auction happens, it is ‘game over’.
Trustee Sale
The sale of your home may occur on the County courthouse steps, which is tradition and strategically located close to the city officials so the deed of your property can be given to the successful bidder. It may be that your house is sold for much, much less than you expected. It may be that your loan payments are much more than the sale price. Usually, the bank accepts the winning bid and agrees to sell the house anyway. The lender may then decide to pursue you personally for the residual money or may clear the debt; it is usual for the bank to pursue the owed funds and it will have a negative effect on your credit rating.
So, how do you get out of a foreclosure – what are the keys?
Pay the owed funds – ask family, friends, other lenders and even your employer to help you. Engage a budgeting service and get serious about maintaining your payments on time.
Ask your lender for a ‘loan modification’ where the payments are less, maybe another loan is provided or the term (number of years) of the loan is extended.
File a lawsuit – the lender cannot sell your home while you have engaged them in a lawsuit. This only works if you really have made the payments or made reasonable steps to repay your loan but the lender is being difficult with you.
Bankruptcy – Chapter 13 bankruptcy allows you to keep your house while making agreed payments. This is drastically affect your credit score, but may save the day. Get accounting and legal advice on all four of these keys.
If you find yourself in a difficult situation and foreclosure is looming, contact us right now. We don’t need the bank and we can discuss arranging with you right now to save your home and/or avoid foreclosure.