When a foreclosure is instituted by your lender because of delinquent mortgage payments, there are actions you can take before losing your home. You still own the house until it sells at auction, but quick action is called for. Even if you’re in a state that allows dual tracking, meaning a short sale is in process at the same time a foreclosure is heading closer to an auction date, you should opt to take the course that causes you the least amount of credit damage before the home legally reverts back to the lender.
Contact your lender and speak with an asset manager in the loss mitigation department. Tell her you’re interested in short selling your home and request a short sale package. Fill out the forms she sends completely, including a hardship letter, and submit all paperwork. Keep copies as backup.
Hire a real estate agent who is a certified short sale specialist, as most states won’t allow you to short sale your home yourself. Find comparable listings and recent closed transactions of other short sales in your neighborhood to gauge a good asking price -- your real estate agent can help you with this. Price your home competitively to attract buyers -- the listing price for short sales are usually for less than the outstanding mortgage balance. Request an authorization letter from your asset manager, giving your agent the authority to act on your behalf in the short sale process.
Keep your home well maintained inside and out. Do not remove appliances. Paint the walls a neutral color and declutter the space. Allow your agent to hold open houses on weekends. Hire a licensed home inspector to issue a report on the condition of your home, as short sales are usually sold as is, and having the report is a further incentive for buyers. Do not offer to make the repairs the inspector finds, unless they are minimal and not costly.
Sign and submit a purchase contract, via your agent, to the lender for its approval. Ask for an approved price you should market the home for if the offer is declined. Attend the closing and sign all the paperwork, and request to be released from all debt obligations once the title is transferred.
Fair Market Sale
Sell your home on the open market at a price that is the fair market value for your home -- meaning the price is what it would command in an open market if the seller is not under pressure to sell and the buyer is knowledgeable, willing, and likewise not under pressure to purchase. You can list the property as a for sale by owner, or hire a real estate agent who is experienced in quick sales. Contact your lender's asset manager and inform him when you get a purchase contract so he can alert the foreclosure department.
Keep your home well maintained inside and out. Do not remove appliances. Paint the walls a neutral color and declutter the space. Allow your agent to hold open houses on weekends. Stage your home so it is inviting.
Proceed with your sale escrow as normal, keeping the asset manager informed when contingencies are cleared. Verify that foreclosure has been suspended after the contingency period. Attend the closing, where the lender receives his funds and your mortgage is discharged. Get a foreclosure release from the lender. Pay all outstanding fees through escrow.
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