1) Don’t be scared
For most of us, this foreclosure lawsuit is the first time we have been exposed to the legal system. Someone is suing us and that can be scary. You may even feel embarrassed. We’ll talk about all of that in a moment, but for now the first thing to do is do nothing. Learn about the process, weigh your options, and make the decisions that are right for you. Don’t panic, you have some time before something happens.
2) Realize that it is not your fault
The day you bought your house was a happy occasion. You planned to live in the house for years, pay your mortgage payments on time, and then one day sell the house and pay off the mortgage. When you bought the house, the lender said you were qualified to make the payments. The appraiser said you were buying the house at the correct price. You did everything you were supposed to do. But then something happened.
There are many reasons why people go into foreclosure. Some people lose their jobs, develop health problems, get divorced, or encounter some other difficulty. For most of us, the collapse of the housing market and financial system is the cause of our inability or unwillingness to continue making mortgage payments. In order to survive this process with your dignity intact, you must realize that situations beyond your control caused this to happen. Trust me, it’s not your fault.
3) Learn the process
Foreclosure is the legal right of a mortgagee to take possession of a property if the borrower fails to make monthly mortgage payments. This is actually a good and necessary function of our financial system. Without it there would be no mortgages and very few people would be able to buy houses. You couldn’t sell your house. Selling your home stops foreclosure.
The process begins with notice of foreclosure. It is the first step in the lawsuit and requires a response. From the date of the foreclosure notice to eventual foreclosure and the bank taking possession of your home can be anywhere from 3 to 9 months or more. In the meantime, you may decide to sell your home short. The sooner you come to this decision, the better. Once your home is listed and you receive an offer, the bank will suspend the foreclosure process while they negotiate the sale. Choosing to short sale your home buys you time, and selling your home will cancel the foreclosure process and lawsuit forever.
4) Don’t pay anyone a dime…ever!
There are entire law firms that specialize in foreclosure protection and short sale negotiation. In the days after your bank begins foreclosure proceedings, you’ll receive letters, postcards, and maybe even phone calls from people claiming they can help you with your situation. It’s fine, but if they ask you for money they are not helping you, they are taking advantage of you.
There is no reason why someone should ask you for money. You’ve already lost enough money. Don’t let anyone talk you into paying them to help you. Legitimate companies are paid by the buyer or the bank at the time of the sale of your home.
5) Decide if a short sale is right for you?
The only way to really stop the foreclosure process (besides winning the lottery) is to sell your house and pay off the mortgage. If you owe more than the house is worth, you will have to sell it short. The bank will appraise the property and accept a payment that is less than the full amount owed on the mortgage.
If you want to stop the foreclosure process and avoid being evicted from your home, a short sale could be the right decision for you.
6) Learn the difference: Short sale vs. Mortgage’s trial
A Short Sale affects your credit less severely than a foreclosure. The waiting time to buy a new house with a mortgage is 2 years. Lenders rarely make deficiency judgments on short sale transactions. It takes 3-6 months to complete the short sale process and get on with your life.
A foreclosure severely affects your credit and takes an average of 7 years to clear. You will not be able to buy another house with a mortgage for 7 years. Almost all lenders file deficiency judgments after completing the foreclosure process. It can take up to 3 years or more to complete the foreclosure process.
7) Don’t give up
The foreclosure process is intimidating and stressful. Everyone who goes through that feels overwhelmed at times. It’s normal to want to give up. But resist that urge. It could be the worst decision of your life.
There is a lot to do to sell your house short. You need to find someone who has the experience to negotiate with the bank on your behalf, you need to find a certified short sale expert to put your property up for sale, and you need to provide the proper financial information and hardship explanations to the bank.
8) Don’t put your property up for sale…yet
One of the most crucial aspects of the short sale process is finding a qualified short sales specialist to list and sell your home. Most average real estate agents cannot and will not do what is necessary to complete a short sale process to closing. They will be happy to accept the listing, but do not have the specific experience and training required to properly handle the complexity of the process. They may even unknowingly violate laws designed to protect buyers and other real estate agents. Your actions may sabotage the process and you may find yourself in a much worse position.
9) It’s not as bad as you think
Foreclosure is the result of unforeseen circumstances beyond your control. Short selling your home is the way out of foreclosure. It may take a little time, it may take a little work, but the end result of a successful short sale will more than make up for the effort.