Avoiding a Triangle Area Foreclosure via Short Sale
Foreclosure is the process of losing your home due to the payments not being made. This is an extreme measure taken by the lender to attempt and stem or recover their lost investment. It can not only be extremely costly to the lender but, in some cases, the costs of the process are also passed on to the homeowner. Not only is there a huge financial hit to you, but, a foreclosure can destroy your credit score as well.
Add to those factors the emotional toll that it can take on you and your family and it’s pretty clear that you’ll want to do whatever you can to avoid losing your home to foreclosure. Financial hardships happen. They’re simply a part of life, unfortunately. When they occur and you fall behind on your mortgage, you need to know your options.
What’s a Foreclosure?
Many have unfortunately heard of foreclosure, however, many aren’t sure of the exact process. Before we advise you on how to avoid it, it’s still best to know exactly what it is:
Foreclosure is a legal process that lenders trigger to gain title to a home that was used as collateral for a mortgage loan that is now in default. It terminates all the homeowner’s rights covered by a mortgage and makes the lender the absolute owner.
The lender may also file a Lis Pendens, which is a notice that begins the process. If this is filed, the homeowner is required to appear in court to answer the charges. The homeowner may ask for an extension, which may or may not be granted. If there is no extension granted the last phase of the foreclosure process starts: the Auction phase.
The foreclosing trustee records and prepares the notice of foreclosure. The notice details the legal description of the property being foreclosed upon and gives the place, time, and date of the pending trustee sale. A foreclosure is complete when the lender obtains the property’s title, the Sheriff or Trustee’s deed is recorded and status code 46 is reported to the Single Family Default Monitoring System.
The entire foreclosure process may take 120+ days from the first missed payment until the completion of the foreclosure. Acting quickly is the best remedy against this drastic legal remedy. One powerful way to avoid a foreclosure is a “short sale”.
How a Short Sale Works
Before the foreclosure process begins, you have the option of looking into a short sale of the home. Owing more money on the property than it’s currently worth, you’ll be able to negotiate a short sale with the lender. Typically, the property is required to be placed on the market and you must have a documented financial hardship to qualify. The legal definition of a “hardship” is a tangible change in the stability of your finances from the date of the initial loan to the present. Examples are job loss, divorce, excessive debt, etc.
Documentation will need to be provided to prove hardship and that mortgage payments can no longer be made. Once this has been reviewed and approved by the lender, they can agree to move forward with the short sale process. This is the “Preparation” step which includes preparing the home for listing/sale with photos and a home inspection. The other steps are as follows:
- The property must be listed for sale in the MLS.
- A line of communication will begin between all involved parties (lender, agent, homeowner).
- The property will be shown frequently and the asking price will be lowered every 15 days (on the 1st and 15th) until a justifiable offer is received.
- Offers are received and given to the homeowner for review and signing and then submitted to the lender.
If the offer is accepted, it is signed by the lender and a contract begins.
- The lender will verify current copies of financial information such as bank statements and paycheck stubs.
- Any additional documentation must also be completed and returned quickly.
- The agent will submit the Short Sale package and all required documentation to the lender for finalization.
After the lender accepts that offer and all documentation is complete and verified, they will inform the buyer that closing can begin. The title company will schedule the closing and the buyer can make final inspections on the home. The homeowner must now vacate the property and completely remove all belongings. Both buyer and homeowner will meet at the title company for the signing of the final paperwork and turning in of keys and remotes.
The title is then transferred and the new owner takes ownership. The lender will issue a mortgage satisfaction document which is then recorded in public records. Keep in mind that if the lender ultimately declines the offer, the lender can either submit a counteroffer to the potential buyer or outright require the home remain listed for sale. The process will continue from there.
Have the Right Team By Your Side
Never go through a foreclosure or short sale alone! Seek experienced and reputable representation to ensure your rights are always protected. We at Gillooly & Associates Realty are always here to help you navigate such a challenging process. Give us a call or fill out the form below to set up a consulation.