Homeowners face foreclosure – what are their options?

Many times the owners of apartments in foreclosure come to me and ask: What options do I have at the moment? Right now, they are facing execution with an auction for a month or two. Here is my answer.

1. You can call your lender and ask him to renew the loan. You may be allowed to renew or make a loan by paying a lump sum or making scheduled payments to your lender over a period of time. Explain to them that you have had a few bad months, but now you are back on your feet and most lenders will try to work something out with you. This option usually works when homeowners do not lag too far behind in payments and can prove that they are in a better financial situation.

When they renew the loan, the Notice of Default (NOD) is canceled, the house gets out of foreclosure and everyone is happy. However, the homeowner’s credit was still affected by the NOD, which will hurt a bit.

Something similar to renewing a loan is called a deferral agreement. Then you are actually negotiating a “deal” with the bank. You can ask the lender if he will add the amount owed in repayments to the back of the loan, or if he will take a smaller part in advance and add the rest to the back of the loan, or pay part in advance and forgive the rest. or you could even ask them to forgive the whole thing.

2. You can refinance your housing. If you have a lot of equity at home and you’re not too far behind with payments, this is a great choice. The lender usually refinances the existing loan and, as part of the new loan, includes any late payments and fees you would need to regain control. The challenge most homeowners have is to make the most of their home. Therefore, there is very little equity in the household, especially when you add repayments and fees, so it is very difficult to refinance. This is one of the reasons why California has one of the lowest foreclosure rates in the country, as home prices are rising so fast that homeowners can refinance relatively easily if they ever run into trouble.

3. You can list your home with a real estate agent. If you have real estate, it can also be a great choice. However, if you have little or no equity, which usually happens, it can be difficult to sell a house in a short time with a real estate agent. It is practically impossible when the house is overused. The reason is that you have to pay a fee or commission to real estate agents when they browse your house. It is usually 3-6% of the purchase price. Real estate agents must increase the purchase price of the house to compensate for their commission and repay the balance of the loan. If an execution auction is approaching, they must quickly find a qualified buyer, and this usually takes a while.

4. You can sell the house yourself. All you have to do is place the SALE sign on your front yard. You should tell everyone that you are selling your house, maybe know a friend or relative who is looking to buy in the neighborhood. If you live in a high-traffic neighborhood with deals, you have a good chance of people calling you. Again, if your house is over-indebted, you will find it very difficult to sell your house quickly.

5. You can return the property to the creditor. This process of transferring ownership from you to the creditor in these circumstances is called a deed instead of an exclusion and is sometimes referred to as “friendly confiscation” because it is essentially the case. Just leave. A writ of execution does not protect your loan or restrict the rights of younger liens. In other words, the creditor would take back the property subordinated to the junior lien holder. This will prevent the possibility of a judgment of deficiency if the property does not produce enough to cover outstanding debts after it goes up for auction. So if you have real estate, this is not a good choice. You waive all rights to receive any surplus from the auction. Using this option is like giving up. Don’t give up when you still have better options.

6. You can sell your house to an investor. Most investors will negotiate with your lender to accept a discount on your loan. This is called a short sale. This allows the investor to buy your house at market value so you can avoid the foreclosure auction and then can turn around and sell it at a profit.

7. You can declare bankruptcy. There are several different “chapters” of bankruptcy. Some are training, others are training, but here is the general idea. When someone declares bankruptcy, it’s almost as if someone has built a “bulletproof” barrier around the house. No one can touch you! However, you are not relieved of all responsibility and most people do not understand it.

[Note: Bankruptcy should be the last alternative or option and should not be used to stop foreclosure unless you have no other option or else you need the protection of a bankruptcy due to other circumstances or situations you are currently up against. If you feel this may be your best option, please seek legal advice from a competent professional in this field.]

8. And finally, you can let it go to foreclosures. Basically, you’re not doing anything. They typically evict you after 2-3 weeks. You leave with nothing in hand and execution on your credit report. This is without a doubt the worst option of all. Don’t let anyone convince you to give up and do nothing. At least try something. You have nothing to lose. Nothing worse can happen to you at this moment.

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