Foreclosure is a scary word for most homeowners. It evokes images of losing your home, a terrible credit score, and a long road to recovery. While that may be a little over-dramatic, the reality is that foreclosure is incredibly painful. A single foreclosure can drop your credit score between 85 and 160 points . That doesn’t include all the late payment marks that come before the foreclosure event. Factoring those in, you can see a drop of up to 200 points. That 850 credit score you worked so hard for will drop way down to 650 points – all within the span of a few months. You’ll go from getting the best interest rates everywhere to struggling to even qualify for loans. That’s why it’s imperative that you avoid foreclosure by selling your Houston home.
In short, a foreclosure is an event that you need to avoid, especially if you have a high credit score. The good news is that foreclosures within Houston are often stoppable – if you know what to do. If you are in the process of a pending foreclosure or have a bank threatening you with one, it’s imperative to understand the steps involved and take action fast. You can always sell a home to stop a foreclosure but lets review the process of a foreclosure to better understand the details involved.
Behind On Payments?
Missing a payment is the first step towards foreclosure. Initially, a missed payment will result in a late charge. At this point, you can avert foreclosure by paying the past due amount. Make your monthly payment plus any fees owed and the bank cannot foreclose on you.
At this point, your best bet is to do everything you can to make the missed payment. You can obtain a loan, sell possessions, sell your car, anything that will buy you some extra time.
Your goal at this phase is to avoid it becoming more serious. If you suspect that you won’t be able to make the payments in the future, you have a couple of options. First, you can contact the lender and see if they will do a loan modification. You might have an altered payment plan (such as a reduced monthly payment), or the bank may forbear the loan. Forbearance is the term for when a bank agrees to keep the mortgage but not take payments for awhile. Eventually, your payments will resume.
At this stage, if you expect to continue having trouble keeping your home, your best bet is to start looking at selling it. Selling at this stage is much less painful and will result in much more money in your pocket than waiting it out. A real estate investor is probably the right choice. They will be able to take the property off your hands quickly (sometimes in as little as a week) and even make your past-due payments. By making a fast deal with an investment company, you can walk away from your property a minimize any negative marks on your credit.
If you are unable to make a payment and elect not to sell the property, then you move onto the next phase of the process.
The Breach Letter
Around 90 days of delinquency, the lender will typically send you a breach letter. This letter states the following:
- Your loan is officially in default
- An action required to cure the default (usually, this action is that you have to pay all missed payments plus penalties)
- A date by which you must make restitution
- Failure to pay may result in an acceleration of the loan and sale of the property
If you have received this letter, do not wait to take action. Under federal law (and Texas law by extension), foreclosure can start at around 120 days of delinquency. By the time you receive this letter, you will have already been at least 90 days delinquent.
If you cannot pay the amount requested in this letter, your best bet is to sell your property. Unless you sell quickly or can somehow find a way to negotiate with the bank, it is very hard at this stage to avert foreclosure. Again, a Houston, TX foreclosure investment firm can buy your property in an all-cash offer that can satisfy the outstanding balance with the lender. Speed is of the essence. A traditional listing and real estate agent will not be fast enough to cure the default and stop the foreclosure.
Need a quick sale
After the date on the breach letter has come and gone, the lender is free to initiate a foreclosure sale. If they elect to do so (and they will), they will send you a notice in writing at least 21 days in advance. The sale will happen at the county courthouse, and the winning bid will receive the property. Once you lose your home through foreclosure, the process finishes. There is no ability in Texas to repurchase the property.
Also, if the sales price was less than the loan amount, the loan-servicer can file a lawsuit for the deficiency. However, you are entitled to a credit for the fair market value of the house. If the home was worth $300,000, you owed $250,000 on it, and the home only sold for $200,000, then the lender could not sue you for the difference since the house was worth more than the balance you owed on it.
Do Not Delay, Stop Foreclosure Immediately
Do not take action serially. That is, don’t try and negotiate with the bank, wait a bit, then try an agent, wait a bit more, and so on. The moment you miss a payment, you should be actively searching for multiple ways to avert foreclosure.
Try negotiating with the bank, but also talk with a real estate investment firm that serves the Houston area. They will be able to give you a quote of what they could pay for your house in cash. In the right conditions, these firms will be able to wipe out the loan’s balance. By not having the mortgage anymore, you’ll be able to walk away from the property free and clear. You might have a small ding on your credit report for the first missed payment – but that’s a minimal price to pay compared to a 200 point drop if the foreclosure goes through, not to mention a 10 year headache!
Let us help you sell your house to avoid foreclosure in Houston! Contact us today for more information! (323)379-4086