Pre-foreclosure starts when your lender sends you a default notice. It is the first step to repossessing your home. At this point, you either pay up your mortgage loan or work out another solution.
Fortunately, pre-foreclosure takes time – a few months in states like Utah and longer in places like New York. Therefore, homeowners may have ample time to think of a solution. But homeowners in pre-foreclosure are usually too anxious. So instead of seeking solutions, they often make rash, ill-informed decisions. These decisions then put them in worse situations like losing their property faster, paying the lender, or even going to jail.
That’s why in this article we are discussing the common mistakes homeowners facing foreclosure should avoid. We hope that by the time you’re done reading, you’ll be able to make better decisions during pre-foreclosure.
1. Ignoring your lender
Granted, at this point, you are confused, afraid, and embarrassed. You don’t know what to do next. You are probably even more worried for your children. So, it may seem like not responding to the lender’s letter will save you from further embarrassment.
However, the truth is that being unresponsive won’t help you. It might escalate the situation further as your lender will almost certainly choose to accelerate the foreclosure process.
So, what should you do? Reach out to your lender.
Many lenders don’t want to get stuck with property taxes or having to market your foreclosed home. They may prefer negotiating a solution to taking your property. So, reaching out to them may allow you to restructure your loan payment or get an extension. Your lender might even let you pursue other options to save your credit, such as selling your home.
2. Not consulting an expert
Another big mistake homeowners facing foreclosure make is not reaching out to an expert like a real estate agent. In all truth, a foreclosure deal is between you and your lender. But experts like agents are more informed and privy to other options you may not know about.
There are benefits to hiring an expert. First, they will help you understand the legal implication of your situation. That is, with someone like a state-licensed agent guiding you, you will know what to do and what to avoid. Also, real estate agents are professional mediators. They can help you negotiate with your lender.
The Bost Redevelopment team is professionally equipped to help you through your pre-foreclosure process. We will talk to you and help you find a solution that will benefit both you and your lender. We also double as an investor. That is, we can buy your pre-foreclosed house as-is and negotiate a fair deal with you.
3. Wrecking the property
It is normal to get angry, but devaluing your property by damaging it will only put you in more trouble. Actions like punching holes through walls, destroying the roof, etc. will be met with legal consequences by your lender.
But that is not all. Have you ever heard of deficiency judgment? This is when the value of your property is less than the mortgage loan. If you devalue your property, you are likely to be hit with a deficiency judgment. And then you will need to pay more money after foreclosure. Also, the homeowner association might file a property violation lawsuit against you.
Instead of damaging your property, you should get a solution. If there is no solution, you should ensure to hand the house over in the best condition possible. Doing this does not mean spending on repairs – it simply means maintaining the value of the home.
4. Refusing to sell
Selling your home when you don’t want to is depressing. But in pre-foreclosure, it might be the most viable option for you. Yet, some homeowners might refuse to sell because they don’t want to face this reality. They would insist on finding solutions even when they know they can’t come up with the payment. In the end, they lose their home, mess up their credit, and have nowhere to turn to.
Selling your pre-foreclosed home will allow you to pay your debt and move on. However, you have to choose the suitable option for your situation to achieve this.
One of the options available to you is selling through the MLS. This method usually requires that you sink money on home repairs and may take months. You could also short sell your house. A short sale occurs when a buyer buys your house for less than the value. However, the bank may not be willing to forgo the remaining balance and may decide to file a delinquent judgment.
Lastly, you could sell to a home investor. This option does not require marketing, repairs, or closing costs. It is a great option to explore as investors close the deal fast and pay in cash. However, your home has to be in reasonably good condition for you to get a good price for it.
5. Not being smart with finances
When foreclosure is inevitable, start saving for a new place to either rent or lease and move as quickly as possible. Foreclosure comes with its negative effect on your credit, and once the foreclosure is on your record, it may become much more difficult to find a place to rent.
Save as much as you can and keep yourself abreast of the decisions of your lender. You never know when you would have to vacate the home. You don’t want to be caught unawares and end up homeless. Prepare yourself financially for the big turn ahead.