Saturday, March 21, 2009

How Does a Property Go Into Foreclosure?

You haven't been able to make your payments on your house recently. Maybe you bought a house with the thought that your house would sell quickly. Or perhaps you lost your job or someone in your family had a serious illness. In any event, you moved into the cash shortage column after the depletion of money in the savings column.

Lenders determine when the foreclosure proceedings start based on their relationship with the homeowner, but once it is determined by the lender to move into foreclosure, a house can be sold in 30 days or less. Laws vary by state, but in Tennessee, the only requirement is that three consecutive printed notices appear in a local publication notifying the public of a foreclosure sale.

Contrary to popular opinion, lenders DO NOT want to take a house back. A lender looses money by taking a house back and the cost for a bank to foreclose on a house is an additional $30,000 to $40,000. This is not a deal for the bank, and it's definitely not a deal for the homeowner.

Options homeowners have when they have trouble making their payments:
1 - Contact the lender immediately and explain the situation. In EVERY phone call, document the date, time, the name/ID number of the employee, and the contents of the discussion.

2 - In your conversations, ask if you can restructure your loan. DO NOT just buy into what they tell you they will do. Calculate the TOTAL cost to restructure.

3 - Before you agree to restructure, talk with relatives, friends, etc. to see if you can make a short-term loan with them, interest free.

4 - Cut back on your household expenses. Why pay $250/month for cable, internet and phone service when you can find the best plans out there that are much less expensive? Be creative and frugle. This is NOT the time to be extravagent.

5 - Once you realize that you may not be able to continue making your payments, talk with a knowledgable real estate agent. I can help you get your house sold.

6 - If things are beyond trying to sell the house, ask the bank if they you can give them the deed in lieu of foreclosure. Some lenders are not willing to do this, but others are. Ask!

7 - Get your agent to ask the lender if they will accept a short sale on the house. A short sale is when the lender will accept a lesser amount for the sale of a house than what is owed on it. More on this topic next week.

8 - If you're at the end of the line in all finances, talk with an experienced bankruptcy attorney.

If you are not sure where you are in this process and need real estate advice, please feel free to contact me. I'm more than happy to share with you what I know to help you in this process.

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