Most people are familiar with the term foreclosure but did you know there is something called pre-foreclosure? This situation is more common than you might think and if you’re trying to sell your house on Long Island while in pre-foreclosure, it’s important that you understand the unique aspects at play. While you might not be at risk of having your house taken from you yet, time is of the essence in making sure you can sell it, either to a cash home buyer or on the open market. Let’s take a closer look at what pre-foreclosure means for a house on Long Island.
What You Should Know About Pre-Forclosure
What is Pre-Foreclosure?
Let’s say you’ve got a mortgage and you start to fall behind on payments. Not too long, perhaps two or three months. That’s when your lender is going to contact you with a default notice on the property. This will inform you that the lender is going to start the foreclosure process if you don’t remedy the mounting debt right away. This is the beginning of pre-foreclosure, a time period that exists between the time they’ve notified you of plans to foreclose but before they actually take possession of the property.
Pre-foreclosure is your last chance to solve the situation before the lender begins foreclosing on your Long Island house. You won’t lose the house or have it taken from you in pre-foreclosure, but it acts as a final warning of sorts that action is coming unless you pay the debt.
How Can a Lender Put You in Pre-Foreclosure?
When you purchase a house, you almost always either pay cash or take out a mortgage loan to pay for the property. In doing so, you sign a contract with the bank or lender to repay the loan in monthly installments that include a principal amount and interest. If you miss three consecutive payments, you are in default on the loan. At that point, you will be notified by the bank of their intentions to take back ownership of the house given the terms of the loan, and you’ll enter pre-foreclosure.
The pre-foreclosure process can last anywhere from three to 10 months and will involve plenty of discussions between the owner and the lender about potential solutions. A lender will often look for ways to avoid foreclosure because they’d rather get some money than no money, and re-selling the house they’ve foreclosed on is a costly and time-consuming process for them. But if there is no deal reached and the owner doesn’t make good on the payments, the house will be put up for auction or trustee sale.
How Can You Get Out of Pre-Foreclosure?
The most obvious way to get your Long Island house out of foreclosure is to pay the outstanding balance on the loan. If you have the money to pay the balance, you can go ahead and do that. Of course, if you did have it, you probably wouldn’t be in this situation, to begin with.
Another solution to get out of pre-foreclosure would be a loan modification. Loan modifications are popular ways for owners to save their homes if they find themselves in a battle to keep up on mortgage payments. What it means is contacting the lender and asking them to extend the length of the loan. Doing so will cut down on the monthly payments, which makes it easier to catch up and remain steady on payments. Lenders will often lower your interest rate as a sign of good faith or even tack your missed payments onto the back of the loan, so you can start fresh with a clean slate.
Remember, banks would prefer to go this route when possible. They don’t like dealing with the hassle of evicting homeowners, foreclosing on homes, and selling the house off. They’ll do it if they have to, of course, but they’re looking for an easy solution just like you. Once a loan modification is agreed upon, the pre-foreclosure process ends and you return to your normal payment schedule.
Another option for getting out of pre-foreclosure would be a deed in lieu of foreclosure. This means that a homeowner who is behind on their mortgage will hand over the deed to the house to the lender and then walk away from it. This settles the debt, so to speak. Of course, a lender has to agree to these terms and whether or not they do depends on a few factors, such as the status of the housing market and condition of the property. If a lender does agree to deed in lieu of foreclosure, that will end the pre-foreclosure process.
Yet another potential way out of pre-foreclosure is to consider a short sale, which means selling your house in order to satisfy the outstanding debts. This is another option that the lender will have to agree to. If the lender agrees, the homeowner will then need to reach out to a real estate agent, who will then list the house as a short sale. These sales often net less money than a regular market sale and the proceeds go directly to the bank to satisfy their outstanding debts. Once you sell the house in a short sale, pre-foreclosure is over and you walk away from the property without ownership.
Does Pre-Foreclosure Affect Your Credit?
If your house goes into foreclosure, that’s going to have a massive effect on your credit score and will do so for years. So that’s something you’re going to want to avoid at all costs. But how does pre-foreclosure affect your credit score? The truth is that it will have an impact since you’ve missed payments on a loan, which is something that shows up on credit reports. That’s going to impact your ability to get loans in the near future. However, your credit score won’t take as huge of a hit as if you entered foreclosure, so consider it an incentive to find a solution before you get there.
Sell Your House As-Is During Pre-Foreclosure
There’s another solution to consider as well. Given all of the potential pitfalls that come with being in pre-foreclosure, it’s critical to find the best solution for yourself. Often, money, time, and a desire to avoid future loan payments drive that decision. If that’s the case, there is a solution where you can sell your house as soon as possible and avoid getting any closer to foreclosure. You can sell your house as-is directly to a cash buyer like Leave the Key Homebuyers.
Leave the Key will purchase your house in any condition or situation, even if you’re close to or already in pre-foreclosure. We’ll take a closer look at your Long Island house and make time to review the details or take a tour. Don’t worry about making repairs or cleaning up as we’ll buy the house in its current condition. We’ll make you a fair cash offer based on the value of the house. Even better, there are no fees you’ll need to deal with beyond that offer.
If you accept, you set the closing date. Then, all you need to do is sign the contract and get your cash. You don’t have to worry about pre-foreclosure or foreclosure anymore and you get to walk away and start fresh with a new living situation.