Foreclosure University Forum


How to Sell a Home Before Foreclosure in Minneapolis (Foreclosures)

by foreclosureuniversity ⌂ @, Friday, March 03, 2017, 10:23 (1126 days ago) @ homesteadroad

1. You can call your bank or lender and ask them to reinstate the loan. You may be allowed to reinstate or make the loan current by paying a lump sum or making scheduled payments to your lender over a given amount of time. Just explain to them you had a few bad months and things are now better and most lenders will try to work something out with you.

Something similar to reinstating the loan is called a Forbearance Agreement. This is when you actually negotiate a "deal" with the bank. You can ask the bank if they will add on the amount owed in back payments to the back of the loan. You could even ask if the bank would be willing to take a smaller portion upfront and add the rest to the back of the loan. Another option is to ask to pay some upfront and forgive the rest. Or you could even ask to forgive the whole thing. You never know unless you ask. Banks want to work with you, trust me.

2. You can refinance your home. If there is lots of equity in your home and you're not to far behind on payments, this is a great option. Usually the lender would refinance the existing loan and include as part of the new loan any late payments, and fees that you would need to regain control. It would all be "wrapped" into one mortgage. The challenge that most homeowners have is they have leveraged their home to the max. Therefore, very little equity is in the home especially when you add on back payments and fees so it becomes very difficult to refinance.

3. You can list your home with a realtor. If you have equity in the property this can be a great option. However, if you have very little equity, it is very hard to sell homes with real estate agents. The reason why is because you have to pay a realtor fee or commission if they list your house. Typically it's 4-6% of the purchase price. Then what happens is they increase the purchase price of the home to compensate for the commission and now it becomes practically impossible to sell your house when it's at or over market value in such a short time. Plus, buyers cannot qualify for loans if the home is selling for more than what it's worth. You would be better off to try and sell it yourself.

4. You can sell the house yourself. All you need to do is put a FOR SALE sign in your front yard. If you go this route, you should tell everyone you are selling your home, maybe they know a friend or relative who is looking to buy in the neighborhood. If you live in a high traffic neighborhood with people driving by, you have a very good chance people will call you. Make sure you advertise that you are a "motivated seller". Call all those signs on the sidewalks and street corners that say, "I buy houses". Obviously, they are investors looking for a good deals so they can make a buck, but you never know.

5. You can give the property back to the lender. If there are no other liens on the title, the lender may agree to take the property back. This process of transferring ownership from you to the lender under these circumstances is called a Deed in Lieu of Foreclosure, and is sometimes referred to as a "friendly foreclosure" because in essence that what it is. You just walk away. A deed in lieu of foreclosure does not protect your credit, nor will it cut off the rights of junior lien holders. In other words, the lender would take the property back subject to the junior lien holders. This will avoid the possibility of a deficiency judgment in the event the property fails to produce enough to cover the outstanding debts after it goes to auction. So if you have equity in the property this is not a good option. You will give up all rights to receive any surplus from the auction.

6. You can try to do a short sale. The investor will negotiate with your lender to accept a discount on your loan. This is called a short sale. What this does is allow the investor to buy your home under market value so you can avoid the foreclosure auction. Then they can help you move and get you into a place that will fit your needs. When doing a short sale, your credit will be affected for a few years, you'll get a 1099 for the difference that was discounted and most likely you'll have to move, but it's way better than a foreclosure where you could get stuck with a deficiency judgment.

7. You can modify your loan. This is usually a temporary solution to help lower your payments until you can get back on your feet. There are a few government programs out there that allow you to modify if you meet certain criteria. Some of that criteria includes when the home was purchased, if you have a hardship and whether or not your lending institution participates in it or not.

8. You can settle your note. This is by far our favorite option for homeowners who have 2nd mortgages, owe more than what their home is worth and want to stay in their home. You (the homeowner) can negotiate with the lender to discount the 2nd mortgage down to 10% to 15% of the original note. Similar to a short sale, EXCEPT: the homeowner gets to stay in their home, their payments are lowered, it usually creates equity in the home or gets it close to market value and credit is NEVER affected when settled. Because it's a settlement, it does not matter if you are behind on payments or not... mortgages or notes can be settled at any time so it's even an option for those who might be struggling to make payments but not yet delinquent. It's also good for those who are upside-down and want to establish equity in their home again. However, at this time, it only works on junior liens like 2nd and 3rd mortgages.

9. You can file bankruptcy. It is very important you understand how bankruptcy works. Many people use bankruptcy as a scare tactic. There are several different "chapters" of bankruptcy. Some are work-out others are wipe-out, but here is the general idea. When someone files bankruptcy it's almost like someone builds a "bullet-proof" barrier around the house. No one can touch you! However, you are not free of all responsibility and most people do not understand that. We are not a bankruptcy attorney, but you need to know the difference between a Chapter 7 and a Chapter 13 bankruptcy so you know what happens.

Good Luck

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