Over the past decade, a lot of homes have gone up on the auction block. Foreclosure has threatened millions of homeowners and devastated some neighborhoods. It’s always a scary time when a household or property owner has to face the threat of foreclosure.
Foreclosures happen for many reasons. Sometimes there’s an unexpected financial emergency or a death in the family, or some other tragic circumstance. Sometimes it’s simply a matter of losing the household’s main income. In other cases, property owners get underwater when the home’s value crashes below the amount that they still owe on the mortgage.
The good news is that homeowners have various solutions available to them in order to prevent a foreclosure from ever happening. By understanding some of the programs and strategies that are available, those who are paying mortgages can be more confident that they can get out of a bad real estate situation without foreclosing on a home or other property.
Look at Available Government Programs
One of the first steps for many homeowners, especially in low income households, is a series of government programs now available to help with the rash of foreclosures that has been happening across America. There is the Home Affordable Modification Program or HAMP, which will modify a mortgage payment, possibly bringing it down to 31% of the property owner’s verified pre-tax income, according to this government web page which provides more details on the program.
There’s also the Home Affordable Refinance Program or HARP — this is available to mortgage holders who haven’t been able to get refinancing on the private market, mainly because the value of a property has declined.
Those who are underwater on their mortgages can work through HARP or a program called the Principal Reduction Alternative or PRA that will also reduce payments according to the home’s value and what is currently owed. Get more on these federal options here.
Of course, all of these government programs are only applicable in certain situations, and really address mortgage holders who are in default. Many find that selling their home to a private investor is a much simpler solution.
Contact Lenders Up Front – And Keep in Touch
Another very good piece of advice for families threatened by foreclosure is to notify lenders as early as possible, and keep current on communications with the lender. There are many different cases where the lender can actually help out with options, so that they don’t end up having to take someone’s house. Experts point out that lenders are not in the mortgage business to take on distressed properties — in many cases, the lender would rather solve the problem in a different way. In fact, this Bankrate article shows how some houses become “zombie” houses because the lender doesn’t want to touch them – and how this can leave the property owner open to tax bills and other problems.
One of the best ways to get a better chance of surviving the default situation is to talk to the lender early and often. Another big step is to find a buyer for the property! That’s where private property buyers come in. They will help when there’s no time left to coordinate with the lender.
Forbearance and Repayment Options
There are also other types of programs available from some lenders. Some of them will help property owners with a forbearance agreement where a mortgage holder can show a hardship such as a job loss or illness. A repayment plan is similar, except that small amounts are paid out over time to get up-to-date with the loan.
There is also a process called deed-in-lieu of foreclosure and while this can be difficult, it might be a better path than foreclosure. Here the borrower hands over ownership of the property to the lender directly. This resource from government lender Freddie Mac shows how a deed in lieu of foreclosure can help prevent a foreclosure sale, while it does not allow the borrower to keep the property. On the other hand, when you sell a property to a private firm, you’re getting the value for that property, which is really a significant success in resolving a situation that could have involved a default on the loan.
Sell the Home
Another very common strategy is to sell the home. If there is adequate value and equity in the home, the property owner should be able to sell through the regular real estate market. However, the real estate agent’s commission and other factors can eat into the profit margin and cause situations where a deal would actually lose money beyond what the mortgage holder has to pay the lender in a theoretical private market sale.
There’s also a system in place called a short sale which can work with underwater properties. When there is not sufficient interest in the private market due to the low value of the property, a short sale can be a way to avoid foreclosure.
A short sale involves selling the property for the amount that the mortgage order may get, and taking a credit hit for the balance. However, a short sale can be less harmful to a credit score than a full-scale foreclosure and can have different kinds of psychological impact as well.
When there’s no buyer on the public market, the best thing to do is to talk to private investors that may be able to offer value for a distressed home or other property.
Sell Your House with a Private Investor for Faster Results
In a lot of cases, it’s impossible to sell the house quickly enough to avoid being bankrupted by the burden of mortgage payments and going into foreclosure as a result. It can be a question of time as well as a question of money. There may simply be lack of interest in the private market, where the property owner who’s trying to prevent foreclosure just doesn’t get offers in quickly enough to be able to sell the property to pay off their loans.
Third-party investors can be a lifesaver in these types of situations. Often billed as “we buy houses” or “cash for houses” businesses, third-party investors will offer a fair market price for a house or property in order to help the property owner to get rid of the property quickly. Talk to individual private investors to try to get a deal made in order to stave off foreclosure and all of the negatives that come with it. Whether it’s a stand-alone home, a condo, or some other type of property, the potential to sell to a buyer company is there.
Any of the above solutions can help to prevent foreclosures by adequate planning, but in many cases, working with a buyer company is particularly quick and effective. A property is a huge asset, but it can also be a huge liability. There’s a lot of emotional toll that is taken when a property owner goes underwater on a party or is unable to make the mortgage payments. Using a home buying company helps to cut through the red tape and get a deal done that allows someone who was unable to pay a mortgage to walk away with confidence.