Foreclosure FAQ
How does the foreclosure process work?
If a homeowner fails to make his monthly mortgage payments, the bank may force the sale of the house at an auction. The auctions are held on the first Tuesday of each month at the county courthouse. The house is sold to the highest bidder, who then becomes the legal owner of the property. He then has the right to evict anyone still living on the premises.
Other than losing one's home and possibly being evicted, what are the negative consequences of foreclosure?
Foreclosure is a black mark on your credit that can severly limit or completely destroy your ability to get a loan for many years to come.
I want to stay in my home. What can I do?
If you want to remain in your home, your best option is to negotiate with your lender. Although many people do not realize it, financial institutions would rather have you simply make your monthly payments than foreclose on your home. The bank may ask you to pay a large sum of money to "reinstate" the loan. If this is something that you can afford, you are in good shape.
However, if you are experiencing financial difficulty and finding it difficult or impossible to make your monthly payments, simply reinstating the loan will not improve your cash flow situation.
I have been contacted by an investor who wants to buy my house, bring the loan current, and rent it back to me. Is this a scam?
Some of these are scams, and some are not. However, from a cash flow perspective, it is one of the worst things you could do. In order for the investor to make a profit, he will most likely have to charge you more in rent than you are currently paying to your lender. If you want to improve your cash flow situation, look for ways to decrease--not increase--your monthly expenses.
Should I file for Bankruptcy?
Before you take this drastic step, you need to be aware of the consequences. Bankruptcy is probably the worst thing you can have on your credit report, and it will remain there for ten years, severely reducing or even eliminating your ability to get a loan. Additionally, people who are appointed payment plans under Chapter 13 often cannot make the required payments. Approximately 70% of homeowners in foreclosure who declare bankruptcy end up in foreclosure again because they cannot meet the requirements of the new payment plan.
Because of its devastating consequences and limited ability to improve homeowners' financial situations, bankruptcy is generally considered a last resort.
It looks like it's just not financially advantageous to stay in my current home. Should I sell my house through a real estate agent?
For homeowners who are not in foreclosure, who have an abundance of time and energy, and who do not need to sell quickly, listing with a real estate agent is usually the best way to get the best price for a home.
However, it is not a very attractive option for homeowners who are facing foreclosure. The average home listed with an agent takes about 70 days to sell. Homeowners in foreclosure typically have a month or less to sell.
Additionally, the hidden costs of selling this way are staggering. Most people make some improvements and repairs before they list their house in order to make it more attractive to potential buyers. This requires time, energy, and money. After the 6% commission and other closing costs, these hidden costs eat up well over 10% of the final selling price.
And even after spending time and money on the labor-intensive process of listing your house, you are still not guaranteed a buyer, and can end up losing both your home and the money you put into it.
If none of these options appeal to me, what should I do?
It depends on your individual situation. At Palatine Investments, we can tailor-fit a deal for you. We can prevent you from losing your house at the auction. We can pay you cash at closing. We can preserve your credit by avoiding foreclosure and bankruptcy. We can save you the time, money, and effort that you would need to sell through an agent. And we can close quickly, usually in just a few days.
If this appeals to you, tell us about your house and we'll get back to you within 24 hours.
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