Avoid Foreclosure
To stop or avoid foreclosure in nearly any city in the United States of America, there are basically only a few legitimate options. This may seem obvious to some, but new for others who have not been able to take an objective look at their situation.
Here are a few options:
- Sell your house prior to the foreclosure auction. Your local real estate market will determine if this is more easily said than done. We’ve been hearing bad news about the national real estate market for a couple of years now. Selling your home could be a challenge. The best thing to do is contact a local real estate broker who specializes in pre-foreclosure or distressed sales. He will be able to help set the price to help you sell your house in your market.
- Contact your bank to negotiate a loan modification. In a loan modification your lender changes the payment terms of your mortgage to more closely match your ability to pay. There is no guarantee a bank will agree to it, but contrary to public opinion, banks don’t want to own your home. It actually costs them money to maintain it before they can resell it. Beware, though. Load modification scams are rampant, preying on desperate homeowners.
- Refinance. Rates are at historic lows. If you can show income, even reduced from when you got your mortgage, you may be able to refinance to take advantage of lower interest rates, or different terms that would enable you to keep your loan current. If your property is worth less than the balance of the mortgage, you may consider a “short refinance”, which is when a lender forgives a portion of the debt to help you qualify for a loan that you will be able to pay. Beware though, of the tax ramifications. The amount of the debt “forgiven” is considered income by the IRS. It will change your tax returns.
When you’re trying to avoid foreclosure, the key is fast action.
While fast action is critical, you should also be wary of scams. There are many legitimate real estate investors and investment groups who offer cash for your home for the purpose of making money on its eventual sale. However, there has been a significant amount of fraud with “Stop Foreclosure” scams. Remember the rule of thumb: If it sounds too good to be true, it probably is.
There is a lot of emotion involved in a financial crisis, especially one that involves possible foreclosure. Sometimes the best course of action will be to figure out how to stay in your house. Other times, getting out from under the overbearing payments and starting over is best.
Getting the advice of an attorney or real estate professional or accountant (or all three!) who is not as emotionally connected to your house as you are is one good step to take. If you work with a real estate broker who has helped people in similar situations to yours (it is more common than you think), they will be able to refer similarly experienced attorneys.
Good luck.
