How to Prevent Foreclosure
So, what can you do to avoid foreclosure?
The Simple Solution: Paying the Debt
Obviously, the fastest way to prevent foreclosure is to come up with the money fast. But you also need to consider whether it’s worth it. If you can’t afford your house, you’ll only end up in the same situation a few months down the road. You’re just kicking the can. It’s best to sell your house as quickly as possible if it simply isn’t a viable economic situation. You can then save your money for other things.
Sometimes you can negotiate with your lender to recondition your loan, with the months that you missed added to the back of the loan rather than remaining on the front end. But that’s rare, and it does require that you have gone through unusual hardships.
Negotiating a Short Sale
If you’re already late on your mortgage, you may be able to negotiate a short sale with your bank. Here’s how it works. Your bank doesn’t want to foreclose on you either. It’s expensive and time consuming, and it requires lots of paperwork. Instead, they may let you “sell short”—sell for less than you owe. You might owe $200,000 on a house and then sell it for $180,000.
This means that you can sell the house fast to get out from under it. But there’s a tremendous downside too. That difference in payments ($200,000 less $180,000) is still going to show up as income to you, because the bank “forgave” it. So you’ll owe taxes on $20,000 of income.
Declaring Bankruptcy
This is, really, a last ditch effort. If you really want to keep your home and think you can afford it, you can try to declare bankruptcy. Declaring bankruptcy is going to do two things. First, it stalls current foreclosure proceedings. All collection proceedings, in fact.
Then, it dissolves your other assets to pay off your other debts. Usually you can keep your primary residence and your car, so if you could still afford your home by dissolving other debts, you might be able to solve the problem this way.
But declaring bankruptcy is a big step, and if you can’t afford your home, it’s not a realistic one. It’s also expensive: You still need to pay a lawyer to help you through the process of bankruptcy.
Selling in Cash — Quickly
Maybe you just want to get out of the house right now. The ideal solution is to sell the house for as much as you can, in cash.
For many people in foreclosure, selling is difficult. Since they’re in foreclosure, they don’t have the extra money (or time) to spend fixing up the property. They may not be able to sell to buyers with mortgages, because mortgage lenders want to see a property in move-in condition.
But there’s a solution. If you sell directly to companies that purchase run-down, old homes that are in need of work, you can get a cash offer without having to make any modifications to the property. Selling in cash means you can sell fast and don’t have to wait around for a mortgage loan to close. You may even be able to sell it as a short sale to sell it even faster.
You never want to go into foreclosure if you can avoid it. Foreclosure can prevent you from getting another home in the future. It can hurt your credit score to the point that you may even find it difficult to rent. But there are options, depending on whether you’re really trying to keep your house or are open to selling it.
Are you about to go into foreclosure? Foreclosure can be the worst thing that can happen to you, both in terms of your financial situation and your credit. Reach out to us at We Buy Salt Lake City Houses to get an offer on your house today.