Before
Foreclosure - Month Two
What
seemed like a bump in the road is now approaching three months
since your payment was due. You don't answer the phone if it isn't
a familiar
number because you just don't have anything to say besides you
can't make the payments up. Borrowing money from family and friends
before foreclosure is
not an option and your credit bureau now reflects your financial
crunch. It is becoming increasingly apparent that more borrowing is
not the
answer.
Making
a payment plan with your mortgage lender at this point is going
to be difficult unless you can come up with a meaningful amount of
cash.
If you are like most people you tried to keep everything current
instead of prioritizing your expenses. No one likes to be late
making ANY payments. The result. Now all of your payments are late.
The options that you have to resolve this problem are becoming more
limited but you still have time to make a difference.
Of
course you could bring the payments current and your lender would probably
let you remain in the home if you stay current. If you have not come
up with a solution to keep your home
then it is time to consider other options.
The
Lease Purchase Option
If
the real estate market in your area is slow as it is in many parts
of the country you may be able to sell your
home
on
a
lease
option
basis. There are pros and cons for the buyer and the seller and you
will probably need the professional help of a realtor or attorney to
complete the transaction.
In lease
option sale the buyer pays a non-refundable Option Fee to
purchase your home. This gives them the right to purchase the home
for a stated amount within a given time period, usually two to three
years. During that time period the tenant/buyer will pay monthly lease
payments. Make sure that your Option Fee is enough to pay your past
due payments and that your lease payments covers your total monthly
costs including your payments, taxes, and insurance.
Using
this option requires that you find another home but it does save
you from having a foreclosure on your credit record. Another possible
disadvantage for you is that your buyer may be late on their payments.
The buyer also takes the risk that a seller may not make their payments
on time and they lose their home and the option to purchase it.
The
biggest advantage of this type of sale is that a lease option sale
does not require the credit approval of a lender and attracts many
more buyers than a traditional purchase. A lease option sale can move
a home fast and may be able to solve your problem before foreclosure.
Just make sure that your buyer has the ability to pay both the Option
Fee
and
the
payments.
Short
Sale
If
you owe more on your home than it will bring on the market there is
a mechanism that will allow you to sell your home and settle your debt
with your lender. A Short Sale is basically an outside offer
to purchase your home before foreclosure for less than you owe on it.
Lenders are willing to accept
less
than the amount owed if it is likely that they will receive more on
a Short Sale than they would after paying the legal fees,
maintenance, and holding costs that occur during a foreclosure.
They
will usually have an informal appraisal known Broker Price Opinion performed
and make their decision based on which is the more profitable alternative
for them.
If
you are
considering
this option
your best bet is to contact a realtor that deals with lenders and Short
Sales on a regular basis. Most lenders will pay the realtor's commission
as a part of their selling expense.
Looking Forward
At
this point in time almost three months have passed since a payment
has been made on your home. Using our hypothetical
timeline the foreclosure
process will begin next month. If you are not confident that you are
going to resolve your situation before foreclosure begins then it is
time to start planning for the future.Whether you sell
your home or it is foreclosed on you are going to have to find another
place to live. Don't wait until the last minute to plan your move.
