how to stop foreclosure

7 Tips for How to Stop Foreclosure on Your Home

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Every three months 250,000 American families enter into foreclosure. That harrowing statistic sheds light on the fact that a large portion of Americans struggle to make the payments necessary to keep their homes.

If you’re currently in the process of managing the possibility of a foreclosure you may be asking yourself a lot of questions.

Where will you go? What will your family do? Is there anything you can do to prevent foreclosure from happening?

Our team at Short Sale Blog understands the stress you’re under. To help give you the information you need, we’ve compiled this list of tips on how to stop foreclosure.

1) Try to Come to an Arrangement

The foreclosure process is a negative experience for the person losing their home. You may be surprised to find out that it’s also a negative experience for the bank or lending institution that owns the home being foreclosed on.

In order to alleviate stress for both parties, most lenders are open to working out an arrangement prior to foreclosure beginning.

Arrangements can take many forms but ultimately, will be some sort of payment plan. The payment plan will set a timetable for you get back on track with your mortgage.

So if you’re committed to keeping your home, you can avoid foreclosure by being honest and open with your lender and trying to work something out.

2) Explore Ancillary Income Opportunities

It may feel like a simple suggestion, but it’s worth mentioning that you should think hard about how to bridge your income gap to avoid foreclosure.

In order to identify the gap, look at what your mortgage payment is. Then, figure out how much of that figure you’re capable of paying for. For example, if you’re liable to pay $2000 dollars a month for your mortgage but can only afford $1300, then you’ve identified a $700.00 gap.

Knowing that figure lets you weigh your options. You could potentially arrange with your lender to bring down your monthly payment to what you can afford. Or, you could take up a side gig to bridge the gap.

Another thing to consider is getting rid of unnecessary expenses. Run an audit of what your monthly expenditures are outside of your mortgage. If you find that there’s anything you can cut, do it.

Common things you may be able to cut back on are costly cable subscriptions, streaming subscriptions, unnecessary transportation costs and eating out.

3) See If You Can Change Your Adjustable Rate to a Fixed Rate

If your foreclosure is due in part to your adjustable interest rate getting too high, you may qualify for refinancing to a fixed rate through government programs.

There is a program called FHASecure that will deduce your eligibility. It can be of assistance in providing you a loan option that will bring your monthly payment down and keep your mortgage consistent.

4) Consider Bankruptcy But Tread Lightly

Bankruptcy can slow down or halt foreclosure proceedings. Bankruptcy will not allow you to evade eventually making payments on your home though.

It’s also important to know that filing for bankruptcy can adversely affect your credit going forward.

It’s best to consult a bankruptcy professional prior to going this route. They will help you fully understand what your obligations are going to be during proceedings.

5) Engage a Housing Counselor

The US Department of Urban Development can hook you up with free or low cost certified housing advisors. These advisors can assess your unique situation and give you personalized advice on how to avoid foreclosure.

Housing advisors may be able to help you obtain special loan modifications which will make your monthly payments more palatable. This is part of a plan laid out via former president Barrack Obama’s Homeowner Affordability and Stability Plan.

6) Explore Refinance Options

If you owe less than what your home is worth, another lender may be willing to refinance your home at a lower rate. This lower rate may bring your monthly payment down to something more manageable which will help you prevent foreclosure.

Many factors affect the rate you may be able to receive from a lender. If for example, your creditworthiness is better now than it was when you initially financed your home, you may qualify for more favorable terms.

7) Short Sell

Even if the foreclosure process has already begun, if you get a qualified offer from a potential buyer you may present the offer to your lender. Many times lenders want to avoid the strenuous process of foreclosing your home, evicting you and then needing to resell the home themselves.

You providing them with a qualified offer that will allow them to circumvent this will likely peak their interest.

Short selling your home also allows you to avoid having a foreclosure and eviction on your record. That may help you get financing in the future should you choose to pursue the purchase of a more affordable home.

Summarizing How to Stop Foreclosure

Going into foreclosure is an intimidating process. Understanding how to stop foreclosure can help you avoid dealing with the stress it entails.

Go online and seek government assistance programs, work something out with your lender, short sell your property or exercise any of the other tips offered throughout this article to help you stop foreclosure and keep your home.

If you’re thinking of short selling your house when considering how to stop foreclosure, you’re going to need all of the information you can get.

Our team at Short Sell Blog is dedicated to providing the most up to date, well-researched information on both short selling as an investment and short selling as a means of foreclosure help.

Read all of the information we have in regard to short selling by clicking here.

You can also explore our comprehensive materials on investing, loans and more!

how to renovate a house on a budget

Short Sale Strategies To Get You Started

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Are you looking to take up short sales as an investment or as an alternative to foreclosure? Rest assured, a short sale is a very profitable strategy for most investors.

To get you started, you need to have some short selling strategies that are guaranteed to bring you success.

Discussed below are some of the short selling strategies and reasons why you should be thinking about implementing short sale in your own real estate investing business.

Basic Short Sale Strategies

If you are new in the industry, you may be wondering what exactly a short sale is.

There is a lot of confusion when it comes to defining short selling. In a nutshell, a short sale is when a bank agrees to allow a homeowner or seller to sell their property for less than what is owed on the mortgage.

Let’s say a homeowner has a property with a mortgage on it for $100,000 and they need to sell that house but they can’t afford to pay the debt anymore.

It could be that the homeowner needs to relocate because they got another job out of state and when the time comes to sell that property, they can only sell it for $99,000.

This means that they are over leveraged because they owe more on the property than what they can actually sell it for. This brings about a short sale type situation.

The seller must have had a hardship such as loss of income, the death of a spouse or being forced to move to another location. He can apply to his mortgage company or bank for them to accept less than full mortgage payoff.

Short Sale vs Foreclosure

Comparing the two, short sale is actually the best of a worse situation.

It may be better for you as an investor to go for short selling instead of foreclosure.

Short sales can be a bit difficult but most times, a short sale is going to be a much more viable option for both the bank and the seller.

A short sale on your credit as an investor has far less damaging value than what a foreclosure would.

This is because a short sale is going to be off your credit in a couple years but a foreclosure is always going to be there. You’re always going to have it.

When you apply for credit, they are always going to ask you if you have ever applied for or have you ever been part of a foreclosure or part of a bankruptcy?

You will most likely be disqualified because of that record.

Short selling is a profitable opportunity for you as an investor as many sellers are very motivated because they don’t want to have a foreclosure.

Here are some short selling strategies to get you started.

Conduct Comprehensive Research

Your job as an investor is to locate potential sellers and make offers on the types of properties that have a higher likelihood of getting accepted than deals that wouldn’t.

Some questions you should be asking yourself are; what makes a good opportunity for a short sale? Why would a bank agree to allow a seller to do a short sale as opposed to foreclose on that property?

Investors are meant to be making offers through homeowners who are agreeable to do a short sale.

Choose a homeowner who is agreeable to do a short sale and that the property on sale is up to standard.

Get Organized

Once you are contacted by a seller who is agreeable to a short sale type situation, you need to have good agents on your team or realtors that can compile the short sale paperwork with that seller.

You also need to get a letter of authorization from the seller allowing you and the realtor to speak on their behalf with the bank about the mortgage.

You should then submit your offer along with the short sale package to the bank and the bank is going to review all the paperwork.

Fulfill All Bank Requirements

Banks or lenders are not in the real estate business but they are in the money business. They are very strategic and calculated about what they do.

They are going to look at the seller’s financials and review their financial statement, bank statements, and tax returns.

They also need to make sure that there’s an actual hardship or some type of insolvency to qualify the seller for short sale.

They will not accept a short sale for someone who has a lot of money in the bank or those who just don’t want to pay their mortgage.

Once they see that there’s a legitimate hardship, have a complete short sale package and an offer on the table, they will order a broker’s price opinion (BPO). This is an independent valuation of the property to give it a market value.

Once they find this value, the bank then compares it to the market value. As long as your offer is within a specific price range or value range, you have a higher likelihood of it getting accepted.

The value of your offer has to fall between 85 to 95 percent of the market value of that BPO.

If your offer falls somewhere in between there, you have a good chance of getting that offer accepted and once it does, then you could be well on your way to making a profit.

Gain More Knowledge on Short selling strategies

As an investor, the more educated you are in the process, the better you will be able to help someone who is in pre-foreclosure or in a short sale type situation.

There is a higher likelihood that you will be the go-to buyer for them and save their house from foreclosure.

The more you’re able to do that, the more success you will have in your investment business.

Join Short Sale Real Estate Today

There are a lot of opportunities that exist with short sales for you as an investor.

Given the state of the economy and the drastic declines in market values over the past few years, a lot of people find themselves in situations where they are over-leveraged.

You will find that more people who owe some money on their mortgage and need to sell their property prefer doing a short sale instead of going through a foreclosure.

The short selling strategies discussed will help you succeed at investing in short sale real estate. For more information, contact us.

short sale realtor

Short Sale Realtor: Do You Need One To Sell Your Home?

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1 in every 2000 home purchases will go through a foreclosure. When they do, it destroys credit and often lives.

On top of that, foreclosures cost banks a lot of money.

A short sale is a mutually-beneficial way to walk away from a home that you can’t afford. But should you try to navigate the process alone? Can just any realtor handle a short sale?

You need to know when it’s time to hire a short sale realtor. Let’s take a look at questions to ask yourself as you decide.

1. Do You Fully Understand What a Short Sale Is?

A short sale is when the price you’re able to sell the home for doesn’t cover obligations to the lender. The lender must agree to take the lesser amount rather than foreclosing or requiring you to pay the difference.

If the lender refuses, you don’t have a short sale. You can’t legally sell the home.

But there’s more.

The sale price must also pay your closing fees and commissions. This could amount to several thousand dollars.

Because the sale price must also cover these expenses, it may make a home that you think isn’t underwater a potential short sale.

Short sales are often a better option for those late on payments and facing foreclosure. But someone might also seek out a short sale if they purchased a home that later dropped in value due to market, damage, neighborhood problems or other factors.

2. Do You Know If You Have a Leg to Stand on?

Many people seek out short sales because they just want to get out of the house for one reason or another. They don’t want to lose the money.

But they don’t realize that if they have significant assets, it will be hard to negotiate a short sale with the bank.

You may be thinking: they can’t ask me to liquidate my kid’s college fund or retirement! But in some cases, they can.

A short sale realtor will help you evaluate your financial situation and work with lenders to make your case.

3. Do You Know How to Work with the Lenders?

A short sale realtor has experience working with the lender. They know what documents you need. They understand what a lender or lenders need to see to approve a short sale.

They understand how much money your bank loses if they have to foreclose. The realtor can use this a leverage.

Lenders will be looking for discrepancies. They’ll try to find anything in your documents that suggests that you’re not being 100% truthful. If you really can pay the difference, they won’t authorize it.

You may even be working with two lenders if you have a second mortgage.

An expert helps you navigate this complex process. You’ll have peace of mind that it’s done right.

4. Have You Explored How a Short Sale will Impact Your Credit?

A short sale will impact your credit report and score. Future lenders will be able to see that you took this option. They may be wary of lending to you soon after.

What it won’t do is keep you from borrowing money or buying a home for up to 7 years like a foreclosure would.

A short sale demonstrates that you took the initiative to understand and exercise your options. You didn’t just let the property get taken from you.

Although a short sale realtor is not a financial advisor, they will be able to further answer credit-related questions.

4. Do You Know How to Find the Right Buyers?

A regular realtor may say they handle short sales. What they may not tell you is that they’ve handled maybe 3 during their 20-year career.

This by no means makes them an expert.

But a short sale realtor is. Short sales are what they do. They understand the rules and that just any buyer won’t do.

The lender must not only approve your short sale. They have to approve the buyer when an offer is made.

Certain buyers are more appealing to the bank. Others will get almost instantly rejected like a buyer who is only putting down a 5% down payment.

6. Are You Able to Weigh the Pros and Cons of a Short Sale?

A short sale realtor will walk you through the pros and cons so that you can make the best decision for your family.

Some of the pros you’ll consider include:

  1. Your mortgage is paid in full.
  2. They can’t come back later for the money.
  3. It’s not a foreclosure.
  4. It’s less of a blemish on your credit.
  5. You’ll be able to buy a new home sooner.

Some cons to consider include:

  1. It’s very time-consuming… unless you hire a short sale realtor.
  2. It forces you to act quickly when a buyer comes along.
  3. You don’t get any money out of the sale of your home.

This only scratches the surface. That’s why speaking with an expert is so helpful.

7. Do You Know Your Rights and Responsibilities?

There are lots of laws and rules you must follow. Not knowing isn’t an excuse. You could miss deadlines that make your short-sale fall-through. In many cases, this forces families into foreclosure.

Other rules are in place to protect you from unscrupulous or negligent lending practices. These rules speed up the process which is generally good for you and the buyer.

Let’s take a look at some of the rules you need to know about:

  1. Buyers must have a pre-approval or cash in hand.
  2. Lenders must decide on an offer within 10 days.
  3. Lenders must allow a 45-day closing so you can make arrangements.
  4. A buyer can’t resell a short sale for 90 days.
  5. Banks can’t foreclose on you for a specified time.
  6. Banks can’t charge you extra fees for a short-sale.
  7. Banks can’t lower commissions after an offer is made.

It’s Time to Get a Short Sale Realtor

If your home value is close to the mortgage balance, you have a potential short sale. Navigating the short sale process can be complex. But a short sale realtor knows what to do.

They can save you time, money, stress and headaches during the process.

For more tips and information related to short sales follow our blog.

what is a short sale

What Is A Short Sale?

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What are you going to do if you lose your job and can’t pay your mortgage?

If you’re having trouble paying your mortgage, or you’re foreseeing a time when you won’t have the money to, you may have come across the idea of a “short sale.”

You may also be familiar with short sales if you’re on the other end, exploring ideas for purchasing a house at an exceptional price.

The word is thrown around a lot, but you’re probably still asking yourself, “What is a short sale?”

What is a Short Sale?

Let’s say, for example, that Brenda gets a mortgage on a $350,000 house. Life is great, she pays her mortgage, everyone is happy.

Then she loses her job.

Now, unable to pay her mortgage, she gets an appraisal to see what her home is worth.

The appraiser lets her know that her neighborhood value has dipped, making her house worth only $275,000. Brenda still has $325,000 left to pay on her mortgage, and she needs to figure out a way to cover the remaining $50,000.

Selling the home for its new market value, with the permission of the lender, can often be enough for lenders to waive the remaining value of a mortgage.

Lenders must be involved

Brenda needs to give her lender a package of financial information, as well as an explanation of her financial need. If the lender grants Brenda the option of “short selling” her house, there is a good chance that the lender will consider the mortgage fully paid.

Brenda saves $50,000.

The lender, usually the homeowner’s bank, could lose a lot of money in this situation, so it’s difficult to get them to accept an appeal.

In most situations, the lender will accept the terms to avoid dealing with a costly foreclosure. This doesn’t mean that they will always accept.

There are pros and cons for buyers and sellers in this situation, so it’s important to have a good idea what you’re getting into.

“What is a short sale going to do for me?” – To answer this question, you’ll need to consider the following factors:

If You’re Selling

When you find yourself in the unfortunate situation of needing to sell your home, a short sale is a good thing to consider. That being said, it isn’t always a good idea.

What could you gain?

1. Money

There is the obvious perk that, if approved by the lender, you could save tens of thousands of dollars. If you are able to agree with your lender upon a mutually beneficial deal, a short sale might the best thing to pursue.

2. Avoid foreclosure

At the very least, you retain a level of control in a short sale.

You are avoiding eviction and suffering heavy blows to your credit, you also show that you were proactive and aware of the situation before it reached the point of foreclosure.

What could you lose?

1. You may have to pay the difference

There’s a decent chance that your lender won’t accept the terms, and require that you pay the full difference on the mortgage.

2. You will invest time and money in the process

In order to go through with a short sale, you’ll need to hire listing agents, seek buyers, negotiate prices, and wait an excruciating length of time for lenders to respond to your requests.

That means time and precious money will be wasted if the lender doesn’t give you the option of a short sale.

3. Your credit will suffer

The degree to which your credit score is affected depends on the situation, but short sales have the potential to affect your credit as badly as a foreclosure does.

That being said, a short sale looks better if you plan to purchase another home in the future.

If You’re Buying

1. You score on a house

The fact is, the seller has no option but to sell their house. If you understand how short sales work, you’ll be able to estimate just how much leverage you have as a buyer, and likely save a lot of money.

2. It may be a great investment

If you end up getting a good deal, odds are you’ll be able to flip the house and make a profit, or live in a house that you normally wouldn’t be able to afford.

The worth of your investment will depend on why the house lost value in the first place, as well as other market factors that you should be aware of.

What could you lose?

1. It could be a bad investment

Who knows why the value of the home decreased? It may seem like a steal, but the property value could be on the decline anyway. You could end up putting a lot of time and effort into something that loses you a lot of money.

2. You might pay too much

You may end up paying more than the house is worth; lenders will work the seller to the bone to get them to pay the full mortgage. If you pay the full price of the mortgage, you’ll be paying more than the home is worth.

3. The price might not be real

The home may be listed as short sale, but the price could be entirely speculative – the lender may not have approved the terms. Sellers will often market the home at a price they have asked the lender to approve, meaning that the price listed may be totally up in the air.

If the lender hasn’t approved the sale, there is no way to know what the price will be. There’s also no way to know if the approval will go through, meaning that you’ll be risking a lot of time and effort on something that may not be real.

Do Your Research

Hopefully you can now answer the question, “What is a short sale?”

The information above is by no means exhaustive. There are plenty of insightful resources that offer extensive knowledge on both sides of the short sale.

If you’re thinking you want to be on the buyer’s end of a short sale, make sure you understand your end of the equation. Research the home’s area, the specifics of the home itself, and why the buyer is selling. Most importantly, make sure the lender has approved the sale.

If you’re selling, make sure a short sale is the smartest move for you. Consider refinancing, renting out your home, or exploring other alternatives before you jump in.

Start acting now. Ask yourself, “What is a short sale?” Make sure you can explain it to yourself before taking any major financial steps. Explore the ins and outs of short sales to see if you should enter into one.

facing foreclosure

Facing Foreclosure: How To Do A Short Sale To Prevent Foreclosure

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If you’re facing a foreclosure, your life is about to transform. But that transformation needn’t be your undoing. Learn how to short sell your properly to prevent the worst aspects of your loss.

Foreclosures don’t ruin lives. It’s the steps homeowners take before that do. If you’re facing foreclosure, acknowledge you have a lot to do in the short term.

You can prevent catastrophic losses to finances and credibility. A short sale is your saving grace to reducing the blow of foreclosure. But you need to learn the right steps to make your short sale succeed.

In this post, we’ll show you how to have a successful short sale so you can prevent foreclosure.

Here’s How a Short Sale Helps If You’re Facing Foreclosure

Foreclosures occur when mortgage payments have stopped. This can be due to financial struggles or abandonment. Your lender will file an NOD and soon after scheduling an auction for the property.

You have an opportunity to sell your home before that auction is scheduled. If you get a likely buyer, your lender is obligated to consider it. They might consider it an opportunity to avoid the hassle of reselling themselves.

This is called a short sale. A short sale is a sale in which a house is sold under market value. It’s a common way for homeowners and lenders to recoup financial losses when facing a foreclosure.

Getting a buyer relieves you of some of the financial damage of the transition. It protects you from the worst credit damage as well.

5 Steps to Completing a Successful Short Sale

You have a very short time span to sell when facing foreclosure. And buyers aren’t already knocking down your door. How can you turn things around when you’re new to this entirely?

There are a lot of moving parts to a short sale. You, the buyer, and the bank all have incentives to see it through. The following five steps will help you make it happen.

1. Notify Your Lender of Your Intentions

When a foreclosure is imminent, your lender will begin making plans to close and resell the property. Your loan documents will have specific details for the event of a foreclosure. Review your rights so you know what options and time you have for a short sale.

Not all properties qualify for a short sale. Your lender must agree to these terms before you can carry it out. You need to take action to this end, whether or not it seems possible.

You will need to work within those limits to sell your property. Remember, your lender has the incentive to see your property sold. No matter the terms, be sure to frame it this way when you speak.

If your lender ultimately agrees, they will be accepting less than the total amount you owe. They will be writing off those losses as a convenience against reselling the house. Maintaining homes is costly, and auctions themselves are unpredictable.

But for your lender to agree, you need a buyer. And securing a buyer is the real challenge.

Your next move at this stage is to submit a letter of authorization. This permits the lender to talk with relevant parties about your loan. This is a good way to invite future cooperation with your lender as you proceed.

Finally, submit a hardship letter. The sadder the letter, the better. It’s another tool to convince your lender to accept less than the value of your loan.

2. Contact an HUD-Approved Housing Counselor

The U.S. Department of Housing and Urban Development (HUD) provides free counseling for homeowners facing foreclosure. These professionals help you understand your rights and options.

Specifically, HUD counselors provide ‘foreclosure avoidance counseling.’ Your counselor will introduce a wide range of options available. They might even help you facilitate your short sale.

Your first step is to meet with the counselor and discuss your financial situation. You’ll address your personal finances before figuring out what options are best for you. Bring all of your government and financial information when you attend.

Avoid private foreclosure prevention companies. They seek to capitalize on your problem. They may offer some assistance, but eventually, they must be paid.

3. Prioritize Your Finances

Regardless of your decision, you need to free up cash. You may be facing fees in addition to arranging your short sale. Start by cutting spending on non-essential recurring services.

If you have other debts, consider deferments or forbearances. You will want to become more settled before you continue paying them off. Consider folding other rental properties and special memberships as well.

Finally, consider selling some assets. You will be moving soon, so take stock of valuable items in your home. This would be a good time to sell any unnecessary vehicles or leisure items as well.

Once you have your finances in line, you’ll want to show your lender. You will need to justify all unusual transactions in your accounts. Your lender won’t sympathize if you’ve recently bought something lavish.

It will help if your lender sees you’re tightening your belt. The lender will understand facing foreclosure is something you’re taking seriously.

4. Facilitate the Short Sale

Attracting a buyer isn’t easy. But you can work with your HUD counselor to adopt the best methods. You’re selling below market value, so you have that working for your form the start.

Advertising a short sale is easier than in the general market. That’s because, in the housing market, short sales are few and far between. Buyers looking broadly may jump on an opportunity to save money.

Start with simple signs with your phone number or email address. You can use public postings and affordable ads to market to buyers. Word of mouth works also – someone will know someone interested in a house.

If time has passed with no buyer, you must buy time with your lender. Create a comparative market analysis to show how market conditions are hurting your chances. Your lender will realize that universal problem and possibly give you more time.

5. What to Do After Your Short Sale

You might need to try a few offers before your lender agrees. When the lender does, you will have averted the worst possible outcome. You will be free of your financial obligation and ready to move forward.

You will still need to recover from the damages. The short sale process may have left you with less money and fewer possessions. You need to find a new home, but your credit score will be down.

Remember, a foreclosure is much worse. Hopefully, you have a fresh perspective on life. You’ve relieved yourself of a financial burden, and it’s time to move forward.

Learn More from Short Sale Blog

You’ve just learned what to do when facing foreclosure.

But do you know about the emotional fallout of a short sale? How about buying in a short sale and your financial future?

We’re ready to share more or hear some of your great ideas. Contact us and let’s start a conversation.