Even though US foreclosure rates reached a 17-year low in 2021 as a result of the global pandemic and the foreclosure moratorium imposed by the government, foreclosure is still a reality for many people across the United States. In this article, we will give you some valuable tips on how to sell your house before foreclosure in the most effective and least stressful way possible.
What is foreclosure?
Foreclosure is the legal process that results when a homeowner fails to pay their mortgage payments on time, so the lender evicts them from the property and tries to recover the defaulted amount by taking ownership of the property and selling it.
Foreclosure is typically triggered when the borrower has missed a specific number of monthly payments (in general, 4 or more), although it may also happen if certain requirements defined in the mortgage document aren’t met. According to Investopedia, the average number of days for the foreclosure process from start to finish is 857, although it may vary by state.
Foreclosure rate in the United States from 2005 to 2021
Source: Statista.com. How to sell your house before foreclosure
Average foreclosure rates reached their peak in 2010 (2.23%), triggered by the global financial crisis of 2007-2009, but they have been gradually declining over the past 10 years, reaching an all-time low of 0.11% in 2021.
However, it’s important to keep in mind that the last couple of years have registered low foreclosure rates because of the government-imposed foreclosure moratorium to fight the outcomes of the COVID-19 pandemic, so let’s see what this means exactly.
What is a foreclosure moratorium?
In response to the global coronavirus (COVID-19) outbreak that struck the world in 2019, the US federal government imposed foreclosure moratoriums (also known as foreclosure forbearance program) to provide relief to people who were struggling financially. It constituted a temporary halt in the initiation or continuation of foreclosure processes for certain kinds of loans and within certain locations.
In other words, homeowners with federally backed mortgage loans were allowed to request a delay in their foreclosure process by simply asking and affirming that they were going through financial hardship as a result of the pandemic.
While most of these moratoriums expired in July 2021, they are still important as to understand why foreclosure rates appear so low over the last couple of years even though the reality may be different.
How to sell your house before foreclosure
Even though most of these foreclosure moratoriums have already expired, homeowners that are struggling financially still have a few options to go with if they are facing the possibility of foreclosure. For example, they can get in touch with their bank and negotiate a possible loan modification, or file for bankruptcy.
And of course, there is always the option to sell the property and use the money to start from scratch. While each of these alternatives has their advantages and disadvantages, in this article, we will focus on some tips on how to sell your house before foreclosure.
So, without further ado, let’s go:
1. Evaluate if it’s right for you
The first thing that you will need to know if you want to sell your house before foreclosure is that it’s important to take your time and evaluate if it’s the right option for you.
While selling the property to avoid foreclosure comes with its cons, such as not receiving full market value because of rush selling, or the fact that you surrender all possibilities to save your home, it can be a highly viable option for some people. Some benefits include:
- Getting ahead of the bank and protecting your credit score
- Allowing you to start from scratch with some liquidity in hand
- Providing a lifeline when you don’t have the equity to refinance
- The opportunity to leave the home on your own terms, with less stress;
Additionally, if you have a family or you are undergoing a lot of stress because of other issues (divorce, financial troubles, etc.), you can sell your house before foreclosure to reduce extra hassle and possible trauma. By selling the property fast and starting fresh, you can get on your feet as quickly as possible.
2. Avoid traditional selling methods
Another tip on how to sell your house before foreclosure is to avoid traditional selling methods. Keep in mind that you can sell your home until the foreclosure process is officially finalized – however, going the traditional real estate route may be the wrong approach for multiple reasons:
- The sale may take up to 6 months or more, time which you may not have (even if you think you do) depending on how far within the foreclosure process you are in. If there is a lot of market uncertainty in your area, this can cause a lot of additional troubles and stress.
- Realtors typically take large commissions out of the sale price – they start from 4% and may go all the way up to 6%. In many occasions, and especially if your home is selling for less than what you owe, you may not be able to afford these commissions.
- Considering that traditional real estate transactions require a lot of formalities, realtors can’t guarantee that they will find a buyer within your timeline, and that the buyer will be able to secure a loan and purchase the property on time.
Average Real Estate Commission Rates by State
Image source: clever.com. Sell your house before foreclosure.
If you are looking to sell your house before foreclosure, you will have to keep in mind that it is a sensitive and delicate process, and you may have to move quickly if you want to secure a sale before the full procedure is completed.
In such cases, you may consider accepting a cash offer from an investor or a homebuyer. Some benefits of selling your house fast for cash include:
- Fast closing of the deal – with companies such as Ultra Home Buyers, you can be closing the deal in as little as 10 days;
- Sell your house as-is – you can significantly reduce stress because you will be able to sell your house no matter in what condition it is;
- It will allow you to cut the costs typically associated with traditional realtors – including appraisal fees, commissions, processing fees, document fees, closing costs, recordation taxes and more;
- Avoid the hassle of appraisals, which can be very stressful and time-consuming for homeowners;
- It also allows you to skip the showings altogether – the cash buyer will evaluate your property and offer a fair offer for it;
- Reduce the risk – as we just mentioned, if you try to sell your house before foreclosure through a real estate agency, there is a higher risk that the sale won’t go through, especially if the buyer can’t secure the loan.
3. Sell your property before the time limit
On paper, you still own your property until the lender proceeds with auctioning it off. Ideally, you don’t want to wait for that long to get moving. The moment you know you are facing foreclosure and can’t pay off your mortgage payments, is the moment you need to make a decision and start looking for the right buyer in case you’ve decided to sell your house before foreclosure.
Image source: guerradays.com. An average foreclosure timeline in Texas.
As we mentioned previously, the time that a foreclosure procedure takes from start to finish may vary depending on the lender and the state, with time limits varying from just a few months to up to 2 years. Most lenders will not begin foreclosure proceedings until you’ve missed 3-6 of the monthly payments.
However, in most occasions, you probably have less time to make a decision and act upon the foreclosure than you initially expected. In these cases, you may need a cash buyer in your area that is ready to purchase your home immediately.
Note: Ultra Home Buyers is a highly experienced homebuyer that can purchase your property quickly nationwide. Get a fair offer for your home. Contact us for more information!
In these cases, you will not only skip on fees and commissions typically involved in the traditional real estate process, but your cash buyer may even negotiate with your lender on your behalf to complete the deal before the process moves along any further. This removes a lot of hassle for you.
4. Determine the value of your property
Of course, before you even try to sell your house before foreclosure, a very important step that you will need to take is to determine the value of your house. In other words, you will need to figure out how much you can get for it – even if it’s not an exact price, it can be an acceptable range.
To do that, you can take a look at similar properties in similar conditions within your area, or consult a professional to get more precise details. You can also try to increase the marketability and value of your property by making repairs, such as fixing plumbing issues, electricity issues, or foundation problems.
Of course, this is definitely not necessary if you are looking to sell the property as is. With cash buyers such as Ultra Home Buyers, you will not have to spend any budget on minor or major upgrades – we will take care of everything.
When preparing to sell your house before foreclosure, the reality for most people is that they can’t afford any upgrades anyway. Otherwise, they might have used these finances to get on track with their mortgage payments.
5. Pay close attention to foreclosure spams
Unfortunately, the moment your house goes into foreclosure, you are highly likely to get get hundreds of messages from investors and companies with big wallets who can’t wait to take the property off your hands.
While some of these companies are absolutely credible and reputable, many others will try to scam you and take advantage of your situation.
For this reason, it’s very important to do your due diligence and perform enough research on the companies that you are considering. This will provide you with peace of mind, especially in times when foreclosure scams are getting more and more common.
Before you sign anything, investigate all potential investors and buyers, and make sure to read the fine print – especially if it sounds too good to be true.
That was all from us for today! Are you ready to sell your house before foreclosure? Get in touch with us and we will be happy to help!