Pre-foreclosure – Everything You Need to Know

What is a Pre-Foreclosure?

Pre-foreclosure is the status of a property as it is in the early stages of being repossessed. If the homeowner is falling behind on payments, the lender will issue a Notice of Default, indicating that they are going to begin the legal action toward foreclosure. 

How Does Pre-Foreclosure occur?

When a homeowner uses a loan to purchase a house, the monthly installments include paying back a portion of the principal, as well as interest on the loan. If an owner misses three months of payments, the owner will receive a Notice of Default, and the pre-foreclosure process can begin. The pre-foreclosure process can take up to 10 months, and may result in either a public auction or a trustee sale.

What will Happen?

If you have been missing payments, and are facing or in pre-foreclosure, you do have options. You must move quickly though so avoid being foreclosure on, at which point the lender will take back the property, and the circumstance will be reported to the credit bureaus. 

What are my Options?

If your preference is to keep the home, the first thing to do immediately is to call the lender to discuss and negotiate the loan. If you are able to come up with the funds to bring the balance current, this is a strong option. Otherwise, the lender may be willing to negotiate the amount to bring the balance current, and/or a payment plan. They may also have options for a loan modification and/or refinance to help the payments become more manageable for the homeowner. 

If none of the options provided by the lender are viable for the homeowner, the only other options to avoid foreclosure are to sell. This could mean listing the property for sale on the market with a Real Estate agent. This option will help to bring the highest offer, but also has timing limitations and other variables to consider before the bank takes back possession. 

Another option for a sale is to sell to an investor. An investor offer will most likely be less than what the open market could bring, but most can close quickly and with cash, which is ideal for time sensitive situations. 

If you are facing pre-foreclosure or are already in pre-foreclosure, please reach out to discuss your specific options and what we can do to help!