A common misconception is that once the bank begins foreclosure proceedings it’s too late to sell your house. Actually, nothing could be further from the truth. This is the very moment you should intensify your efforts to find a buyer. The best case scenario is you are able to sell your house for a high enough price to pay off the mortgage and make a down payment on another house. The important point is you need to take whatever steps are necessary to STOP the foreclosure process. Foreclosure allowed to go full term will have a seriously detrimental effect on your credit for anywhere from seven to ten years.
Let’s delve into the matter more closely, because there are several reasons it is to your advantage to sell your house if you fall behind on mortgage payments and the bank decides to foreclose.
Stops Foreclosure: As we already mentioned, the first and best reason to pursue a house sale when you find yourself the target of a foreclosure is that an active sales contract puts an immediate end to the foreclosure. In the heat of the moment, sometimes it’s hard to remember the bank doesn’t hate you personally. It’s just business. What they want is the money they have loaned you in the form of a mortgage. Whether they get that money from your continued monthly payments or through a sale to a third party is irrelevant. There’s a good chance they’ll get more money from an individual buyer than to let the foreclosure culminate in an auction. Even if the house is in the process of being auctioned off, bidding will be halted if you manage to come up with a legitimate buyer. This is a good reason to keep working at it right up until the moment the auctioneer’s gavel falls.
Higher Sales Price: It should surprise no one that a house is likely to sell for more money to an individual prior to a foreclosure auction than at the auction itself. These types of auctions are notorious for being ripe with shenanigans and collusion designed to drive the price down to sometimes laughably low levels. Theoretically, a buyer interested enough to pursue a sales contract on a house headed for foreclosure should be willing to pay an amount closer to the actual market value. Like we said, you might be able to pay off the bank and still have a chunk of money left over for yourself.
Protect Your Credit: Don’t underestimate the importance of preserving your good credit. A full term foreclosure can decimate what it’s taken years to build, creating lasting, long term damage in the process. If for no other reason than to save your credit, it’s worth trying to sell your house before the auction. Bad credit is a big deal because most of us, through the course of our life, eventually want to make a purchase large enough – like property, a home, or car – that a bank loan becomes involved. A poor credit rating can result in your loan application being denied completely or, at the very least, be attached to a larger than normal down payment and ludicrously high interest rate. And if you decide to apply for a credit card, forget it. Your newly acquired bad credit insures the worst terms and highest interest. These are all hassles a foreclosure easily creates but which can be avoided by finding a buyer quickly.
Time to Move: If you happen to still be living in the house when it is sold at auction, look out! If the new owner is motivated, many states allow him to file legal papers to have you evicted in a matter of days. A traditional sales contract often provides the luxury of 30 to 60 days to pack your things and move. This gives you time to catch your breath and make plans for where you’re going to live next.
By now, you should begin to see the wisdom in never allowing a foreclosure to proceed to auction. While there is no guarantee you’ll be able to find a buyer or that the bank will agree to the offer, you should not sit around on your hands worrying about that. It’s out of your control. What is in your control is how much time you spend exhausting every opportunity to get your house sold.
Open Door Auctions is an innovative new company, founded by Jason Hartman, that utilizes a unique strategy to sell your house in two short weeks. The good news is that it’s NOT a foreclosure auction and avoids the stigma associated with that. What it will do for you is quickly collect anywhere from a handful to a few dozen offers from sincere buyers. You and your lender can mull them over and decide whether or not to accept one.
Click here for more information on how our system works.
The Open Door Auctions Team
Flickr / Jeffrey Beall