How to Avoid Foreclosure

Couple worried about foreclosure on house

Nobody ever wants to deal with a foreclosure on their house. Unfortunately, things sometimes happen in life and you are left in a tough financial situation. You may fall behind on your mortgage payments and the bank will start to apply more and more pressure. The good news is there may be ways for you to avoid foreclosure and get out from under a bad financial situation.

Here’s the truth, however. Banks don’t really want to foreclose on properties either. They aren’t out to get you, but it’s understandable that they have to protect their financial assets and do what is necessary when loans are defaulted. A foreclosure or short sale costs them time and resources and they usually end up losing money in the end. They will give you every chance to make up payments and stay in your home. Eventually, though, a foreclosure becomes imminent.

So, how do you avoid foreclosure and all the negative credit score effects that come with one? Here are some options you can look into, according to PropertyLark:

Talk to the Bank/Lender

The first thing you should do is reach out to your bank or your lender. There may be financing options they can offer that are worth exploring. At the very least, they can let you know how the process is going to work, how much time you have to make up your defaulted payments, and other important details you need to know. A short sale may be an option that allows you to minimize the impact on your credit score and get out from under the property before it is foreclosed upon. Maybe you are in a position to qualify for a refinance, repayment plan, forbearance, loan modification, second mortgage or home equity loan that can buy you more time or improve your overall home loan situation. The point is, it never hurts to ask. You may have more options than you realize.

Talk to an Attorney

If your situation is dire and you are worried about foreclosure, it’s also good to talk to an attorney—especially one who specializes in real estate law or personal finance. They might be able to fight on your behalf and negotiate a better deal with the bank. They may be able to help you file for bankruptcy, if that is indeed the best option after all other ideas have been exhausted. They can provide you objective guidance and sound legal support as you navigate what can be a complicated legal process. Don’t try to fight a foreclosure on your own!

Sell Your House While You Can!

Depending on your financial situation and your current ownership stake in the house (i.e., how much equity you have in it, if any), you may be able to sell your house now before your loan is defaulted. Even if you are slightly upside-down on your mortgage, selling preemptively can allow you to avoid foreclosure and potentially minimize your financial damage in the end.

If you are actually in a good position in terms of your equity (the house is worth more than you owe on your loan), then selling it now makes perfect sense. The bank will get paid off and you might actually come out of the sale with money in your pocket. If you owe more than the house is worth, then you want to proceed with a sale carefully or figure out some creative seller financing options that benefit you more than a straight sale.

You can save some money on the home sale by not using a real estate agent, whether that means doing it on your own as a “For Sale By Owner” sale or working with a real estate investor who is willing to pay cash or is open to different creative financing options. When you work with PropertyLark, we will help you explore all your different selling options and determine which is the best solution for your specific financial distress situation.

If you are worried about foreclosure, don’t just lie back and wait for it to inevitably happen. Take action as soon as you can. This will potentially give you more options to consider and you may be able to get out of a bad situation before it gets much, much worse when the bank eventually comes knocking on your door and ready to seize your property.

If you are thinking about selling your house for any reason, contact PropertyLark today. Fill out our seller contact form on any page of this site and we’ll get back to you within 24 hours. We can provide you with an all-cash offer or help you explore other selling and financing options.