So you’ve missed a few payments and now you’ve got a notice from the bank that you’re facing foreclosure. What do you do?!
Well, here are 6 solutions that allow you to keep your house and 7 that let you ditch it and the foreclosure.
Option 1 to keep your house and get out of foreclosure…
Come up with the cash to catch up your loan. I recommend doing this by selling stuff you don’t need, like an extra car or those old toys from when you were a kid. (BTW, check those toys out on eBay, they may be worth more than you think.) Or you can cash some investments. It’s definitely not ideal, but neither is facing foreclosure. And this helps you get out of it quickly
Option 2 is getting a personal loan. There are really a couple of ways to go about doing this. The first one is to go to someone you know has the money and ask them. It’s going to be hard and you’re going to be embarrassed. But this has a higher success rate in my experience as long as the amount isn’t too much as these people know you and your character. You aren’t just a number to them.
The other option for a personal loan is to go to a financial institution that does personal loans. They usually do it based on your credit score and your income history, which may be good news for you if you haven’t been hit too hard on your credit yet. Another option I consider in this category is using a loan that has collateral on it, like a 401k loan. Not all retirement companies will allow it, but it’s a good idea to see if they can help. I don’t recommend using a loan company that’s based on your car or payday loan stores as those rates can be really high and can put you in a worse situation. (That was option 3 for those keeping count.)
Your next 2 options have to do with talking to your lender. Sometimes, if you get to them early enough and explain the situation they can do a couple of things that will allow you to keep your house. You still have to pay them what you owe but they can offer the option of a loan modification or even forbearance. It will be dependent on what the lender’s requirements are and their decision, but these are options that will help you get out of foreclosure and keep your home. Just remember to treat it like voting in Chicago, do it early and often!
Another option you have is to just turn it into a rental. How can you do this if you still owe money on it? Well, you’ll still need to catch up the loan, but having the extra money on the rent may allow you to do just that and what do you know? After you’ve caught it up, you’ll actually have extra income. The downside to this is that you need to find a place to live while your old home becomes a rental. There may be some extra work you’ll need to do… but you do get out of foreclosure and keep your home! That’s also the last option I have that lets you get out of foreclosure and keep the property.
Now we get to the options that let you ditch the property and get out of foreclosure, starting with the ones that generally make you the most money as long as you have equity in your house and you have the time. Are you ready? List it with an agent! By doing that you generally will have 2 options here, and a good agent will walk you through both and you can decide what’s best for you. The first option and the one that generally nets you the most is to rehab it and improve it and list it to sell. Again, it will be market specific and your agent will have a good idea, so talk to them when considering this one. The other option when listing with an agent is just to list it as is. This will usually net you less than rehabbing it, but it gets it done quicker and you still walk away with cash in your pocket. Again, you will need to have some equity in your property to do this and it will take time.
Options 9 and 10 involve selling to an investor, like SILT. It does allow for the quickest way to get out from under foreclosure. The first way is a cash sale. You will need to have equity in the house for this to be an option and you will be turning down some money for convenience. The other option that some investors offer is a creative financing option. The easiest way for me to explain this is to tell you that they take over the payments on your loan. For this option, you don’t need to have any equity and it may even help you build your credit back up. Each investor is different and I would talk to the ones you like and see what they offer when considering these options.
The last few options are ways to get out of foreclosure but you lose the house in almost all of them and they don’t help you do it quickly or with anything in your pocket. So what are they? Well the first one I’m going to talk about is one that most don’t think of and it’s a deed in lieu of foreclosure to the bank. In this option, the bank takes your deed and terminates your mortgage. Yep, your payments are done and you don’t have to worry about foreclosure. The problem is, banks aren’t known for wanting property and it’s not how they really make money. So at the end of the day, they may not want to do this.
Your 12th option, (go ahead, go back and count if you don’t believe me) is to do a short sale. Why do I not really recommend this? First I have to give you notice here: I am not a tax professional or CPA. Please talk to them to verify and see what the ramifications may be. Now that’s out of the way. You may have to claim the difference between what the property sells for and the amount of your loan as income. Yeah, you read that right. You may actually have to pay Uncle Sam taxes on the difference. Who really wants to do that when they already are losing their house?!
And the last option is to just file bankruptcy. The only real advantage here is that you can start to figure out other options while the bankruptcy completes. It will eventually really hurt your credit and you do lose your house, but it is still an option.
So when working through all of these options, don’t hesitate to reach out to someone who can help you start to walk through those options. You can contact us here and we can start to help you. The biggest thing you need to do is to start the process early. The earlier you do it, the better off you are at finding an option that will fit you and your situation the best. If you don’t even want to try keeping your house, you can fill out a form to let us know you’re looking for your best options to sell it by going here.
