6 Little-Known Ways To Stop Foreclosure In Its Tracks
Life happens. And everyone goes through a time in life when there’s a hardship that might cause financial obstacles.
Whether you’ve hit a “bump” on the road with paying your mortgage, or you’ve lost your job, or some other financial distress — it doesn’t matter — we want to help you and give you ALL The information you need to make the best decision for your situation.
Because everyone’s situation is different — but the process for Foreclosure and the little ways to stop it don’t change.
Before you read on, if you didn’t know…
Foreclosure in most states means that once you’ve missed a certain number of payments, the bank/lender will then file a legal notice (Referred to as “Notice of Default” or NOD) — some states will just have a “notice of sale/auction” with a marked date of when the auction will be. Some states have a “non Judicial foreclosure system” (Michigan)…. Others have a “Judicial system” (like Florida and Delaware)… and there are some states that’s a mix of both (like Georgia and Hawaii)*.
Regardless of which state you’re in, when you receive a notice of default/sale, you have a certain period of time to recoup and fix the problem.
*NOTE: So, since we’re not licensed attorneys we HAVE to place this legal disclaimer here, so there it goes… we are not attorneys in any way. We are house buyers. And this article is NOT a legal guide but for entertainment purposes only. Please consult an attorney regarding your foreclosure.
You might think a NOD means you’ve lost the property…. But FAR from it!
After a NOD/NOS/Notice of auction is filed, depending on the state, you could have as little as 90 days, or 7 seven years to resolve it (some states like Nevada and Hawaii take this long for foreclosure)! During this time, Some lenders will actually try to contact you to make a compromise — If they are trying to reach you, take advantage and see if you can strike a deal either via Loan extension or restructuring the loan.
In some states, it is a “2-notice system”. Where first a NOD is filed, THEN a Notice of sale/auction after that. Others only file 1 notice, and that’s it. Make sure you understand that. Here’s an article that explains it and where your state falls in.
Whether your state files only 1 notice or 2… the last notice is the “11th hour”.
After this point, you have a set date when the auction of your House will take place.
Where investors from all over, will be placing low-balling bids and you won’t get any of it.
Your equity is gone after this point.
You don’t want to reach this stage.
So here are 6 ways (actually 7 with a bonus at the end), to stop foreclosure:
- Bank Negotiation — You can actually work out a compromise with the bank during the NOD stage. They WANT to help. They don’t want to take up the hassle of owning a property, and/or going into the auction. They can work out a new agreement that modifies your loan to something you can afford and makes sense to them. It’s as easy as calling the number they give (they should have mailed you a few times by now)
- Short sale — During the NOD stage, for every offer you receive the bank MUST consider it. And if you owe more than what the house is worth, you’ll have to do what’s called a “short sale” which means you sell for less than the loan amount. And sometimes The truth is, if a bank takes over your house, there are going to try and immediately sell it (and sell it for a VERY low price to an investor); they actually DON’T want that hassle. And will consider a “short sale” offer instead — even if it means they’ll lose money. After the NOD has been initiated, it’s important to start searching for offers immediately for banks to consider.
- Bankruptcy –– This stops foreclosure dead in its tracks. Once you file a bankruptcy petition, federal law prohibits any debt collectors, including your mortgage lender, from continuing any collection (including foreclosure. This might sound like an ideal situation, but here’s the truth of it: You’ll have to go to court, and your debt collectors (the bank/lender) will also appear in front of the judge. The judge’s role is to play “referee” between you and the bank, and you still might have to owe after that. The method only buys you time, and the judge may create a “payment plan” for all that you owe. It doesn’t necessarily “erase” foreclosure… and… it will be on your record for a while. Consult with a bankruptcy attorney regarding whether filing for bankruptcy is a good strategy for you.
- Deed in Lieu of Foreclosure — You can, through negotiation, offer to sign over the house deed to the bank/lender. They become the new owner overnight and you won’t get the equity, and you’ll have to leave the house or be evicted. This method certainly does stop foreclosure easily and quickly, but with some drawbacks. First off, lenders are reluctant to take over a deed. They don’t want to become property owners, only collect mortgages. This method is usually done when you’ve had your house listed for sale for quite a while, but still can’t sell it AND you’ve presented a case that you’re in financial hardship and can’t find any way to make payments. In those cases, the banks will consider a Deed in lieu. However, even when all these factors are present, many lenders will not agree to a deed in lieu, but it is worth a try!
- Assumption of the loan — Most loans these days are no longer assumable. The average mortgage now contains a “due on sale” clause by which the borrower agrees to pay the loan off entirely if and when they transfer the property. However, if you are facing foreclosure, you might be able to persuade your lender to modify your loan, delete this clause and allow another buyer to assume your loan. The lender may want to assess the new buyer’s qualifications, but it can be a win-win-win option for all. You might be able to negotiate a down payment from the buyer which you can use to pay off your outstanding past-due mortgage balance.
- Lease Option — This is one of my favorites, but in this scenario, the prospective buyer becomes your tenant (at first), and you continue owning the property until the buyer has saved enough down payment money, improved their credit sufficiently or sold their other home. In most situations, the buyer will make a one-time, lump option payment upfront, paying you to obtain the option to purchase your home. How does this stop your foreclosure? When this tenant pays a lump sum to buy their option, that lump could be enough to bring your mortgage current and remove the NOD. Then, you have a tenant (who has an interest in buying your property so he/she will most likely always make payments on time), who’ll pay the mortgage. Of course, in this scenario, you can’t live in the house with your tenant… but it is a very quick and easy way to stop the foreclosure AND keep your asset!
I promised a 7th way, and it’s something we’ve most likely offered to you already.
And it’s our hassle-free cash offer program.
We can buy your house in 7 days (typically)…
… And you don’t have to make a single repair…
… nor pay for closing costs or agent fees…
.. and you can even leave all your unwanted things behind.
It’s one of the easiest and quickest ways to get out of foreclosure AND get money in your pocket (if you’re not too much “underwater”)
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