There is almost nothing more stressful than getting behind on payments for your home and feeling like there’s nothing you can do to avoid facing foreclosure . I have talked to many people in this situation and the best thing you can do is take action. Even though it’s painful, you can’t be an ostrich with your head in the sand, or it will get worse. I will walk through this with you.
As a real estate investor, I have bought many homes from people who were struggling with personal problems, financial difficulty, or house issues that made it difficult for them to list and sell their house with a real estate agent the traditional way.
The good news is that chances are you have more options than you think. As both a real estate agent and an investor, I can help walk you through your options, so things are spelled out clearly. If you want to sell your ugly house fast and just be done with it quickly – we can help. If you have a nice home in a nice area and are just starting to get behind, there are still things that can be done. If you are behind on payments or facing foreclosure, with a ticking clock, there may still be time to get your house sold. Call or text me today, or fill out the form at the bottom of this page, and we will figure this out together. Believe me, you won’t shock me, and I know I can help.
What Happens When You’re Behind on Payments and Facing Foreclosure In Washington State – How Does It Work?
Foreclosure is the process by which the bank takes a property back from a homeowner who has been unable to pay his mortgage. In many cases personal circumstances like divorce, death, medical bills or job loss force families into a financial tailspin and soon they are behind on payments and facing foreclosure. Paying thousands of dollars to keep up or catch up on a monthly mortgage can become impossible.
When a homeowner starts missing payments and falls behind, the bank will contact them with warnings, collections letters and calls. It’s no fun. Many homeowners throw these in the trash and avoid these stressful attempts at communication because they just make you feel more helpless.
In addition to the mortgage bank, you may be suffering from an onslaught of similar communication from other creditors as well. It can get overwhelming fast. However, if you get in touch with the bank and tell them you are behind on payments and you want to fix it, they may be able to negotiate some sort of work-out-plan or forebearance agreement with you, if they think you can get your property payments back on track.
Eventually, when the bank gives up and believes you are NOT going to be making the payments afterall, they will start the foreclosure with a public announcement in the newspaper. Once you are facing foreclosure, the clock is ticking and the time is limited to get the property sold.
When the homeowner still owns the house, but the bank has initiated the foreclosure process, the house is said to be in “pre-foreclosure.” The entire process takes about 4 months, and then the bank will re-possess the home.
What Should You Do If You’re Behind On Payments And Facing Foreclosure?
Many times, if you’re behind on payments and the bank has started talking about foreclosure, the best option the homeowner has is to sell the house quickly. If your home is in good condition (move-in ready) and you have plenty of equity (meaning you owe much less on your mortgage than the house is worth), then listing the home with a real estate agent is still a possibility. It will be important to get the home sold quickly, so the new buyer pays off your mortgage before your lender completes the foreclosure process. (Typically foreclosures take about 120 days in Washington State). That’s only four months. Usually a “normal buyer” who you find through your real estate agent will take at least 30 days to get a new loan in place, so time is of the essence to get the property under contract.
If the home is in rough condition – either because you’ve lived in it for years without doing any updating, or it has suffered some sort of physical damage, then chances are even if you list it on the MLS, it will still end up being purchased by an investor. The funny thing about investors is that they want to make a profit from all their work remodeling and reselling houses, so chances are they will offer you a significantly lower price than if your home has had $50,000 of recent updates.
A Short Sale May Be A Possibility If Your Home Has No Equity
If you don’t have that much time, or if there is not enough equity in the home, your bank may be willing to discuss a short sale. The short sale is when the bank allows you to sell the house for less than what is owed and forgives the extra debt. So, if your house had a mortgage for $500,000, but you could only sell it in its present condition for $450,000, the bank may be willing to work with you to allow you to sell it and the bank to take the loss. Talk to the bank or a real estate agent who understand short sales (such as yours truly… Emily Cressey agent-investor extraordinaire!), so you can better understand your options.
What To Expect If You’re Behind On Payments and Facing Foreclosure On Your Mortgage
You should expect to be contacted by lots of investors if your home is going into foreclosure. Once the bank records a public notice announcing that the property is in default, all the investors will find out about your bad news, and you might feel like they are circling you like vultures.
Many real estate investors hope to reach homeowners who are behind on their payments (known as being in “default”) by sending them postcards, posting “We Buy Houses” yard signs in the neighborhood, calling, texting, or knocking on the door to see if they’re interested in selling.
Reading an article like this will help you understand your options before you invite anyone into your home to discuss the possibility of a foreclosure sale. You’re so ahead of the game!
The Forbearance Plan: Catching up on Payments To Avoid Foreclosure
If a homeowner thinks he will be able to make up his overdue payments, he can get on a payment plan with the bank. This is often called a “forbearance agreement” and it means the bank will forbear from foreclosing, if the homeowner sticks to the new payment plan. This can be a good strategy if a temporary setback – such as job loss or being out of work due to injury – has been resolved and the homeowner who is behind on payments is now able to catch up. If you are now back to work and able to make payments again, you have a good chance of being able to make this work!
However, if you do not have a future reliable source of income re-established, the bank may not agree to forbearance. The bank wants to know they are working with a borrower who can make good on the loan, not just stringing-along a case of somebody who can no longer afford their house!
Working With An Investor – What Are The Options?
Oftentimes, when I have worked with homeowners who are motivated to sell their homes quickly, they are not anticipating being able to catch up their back payments. They may anticipate trouble selling the house, perhaps it needs too many repairs and would not attract a first-time homeowner looking for that pinterest-perfect, sparkly new home. If you can’t put money into fixing up your home to make it sell for top dollar, your pool of buyers becomes limited to investors who are going to have to pay to do the repairs themselves.
1) Fast Cash For Your House – Cash Today and Walk Away
How does it work when an investor offers you fast cash for your house?
If an investor comes to look at your home that is going into forecosure (often called pre-foreclosure) he will ask you a variety of questions that are important for his “investor math.”
Key Questions Investors Will Ask About Your Foreclosure Property
a) How much do you owe on your mortgage?
b) How many repairs do they need to make to get your house to sell on the MLS with an agent.
c) What price will the agent expect to sell your house for?
d) What Are The Transaction Costs?
They will also add in a few other numbers they need to take into account such as closing costs, real estate commissions, carrying costs (such as paying for the utilities, taxes, insurance and the mortgage while they are fixing it up and selling it).
e) Is There Anything Left To Make A Profit?
After that they will probably (silently) ask themselves the question of how much THEY want to earn in order to take a few months of their life to work on this project. Most investors will probably want to make a decent amount on the home – they have to earn their whole living on the profits of a few houses per year. Typically they will need to build in more profit margin if the house needs extensive repair or the real estate market is not very strong at the moment – such as if the house will be ready to sell during winter, etc. Each investor has his own formula, but at the end of the day, it often comes down to who you trust to take good care of you and make sure you can get moved safely, and possibly get you some cash for your equity, if there’s room in the deal for you to share in any profits.
2) Taking Over Your Payments – Keep The Existing Loan In Place
If your home does NOT need a lot of repairs in order to sell, you might be able to work with an investor who can take over your payments for you. This is actually one of my favorite ways to buy property, as I usually end up buying nice properties in nice areas. There are a variety of ways to structure a deal where a real estate investor will take over your payments. Some methods are: lease/option and taking over the property subject to the existing mortgage.
In this case the investor can help you catch up on your back payments, and continue making payments to the bank, so it doesn’t foreclose. You will still have to move out of the property, but the investor may be able to help you with a moving truck and money for a deposit on your next home. It may be that you will have to rent for a while if your credit has been damaged by bankruptcy or late payments on the mortgage. Many people are fine with downsizing and getting rid of the stress of a too-expensive house that is making them “cash poor.“
3. Owner Financing – Payments Over Time
Giving a real estate investor an owner-financing deal can be a very appealing option if you have enough equity in the deal that you will get to share in the profit from the sale of the home. Although the investor may be trying to conserve cash upfront (because he’s shelling out to stop the foreclosure, pretty-up the home, and get it ready for sale), he will want to treat you right and make sure you can receive a level of profit that is fair to you, if there is still room there to make the deal work. In this case, the investor may be able to give you small monthly payments, or you may end up having to wait and get a chunk at the end – but this would at least provide the option that you would get paid when the investor gets paid.
The Benefits Of Addressing Foreclosure Concerns Quickly
So if you are behind on payments and/or facing foreclosure, the good news is, that there’s a lot you can do to catch up your payments, stop the foreclosure, sell your house fast, and protect your credit. It will be a lot easier for you to get a new loan in the future (for houses, cards and credit cards) if you DO NOT HAVE A FORECLOSURE ON YOUR CREDIT!
When going through these difficult situations, many people are tempted to put their heads in the sand and avoid the stress of dealing with the problem. But not you – that’s why you’re here doing your research and discovering your options for fixing the situation when you are behind on payments and facing foreclosure.
At the end of the day, you will need to understand the value of your property and what can be salvaged by selling it to an investor vs selling it on the MLS with an agent. Ultimately, every house will sell, but the questions here are HOW MUCH will it sell for, and HOW FAST will it sell?
I am happy to talk to you over the phone or in person if you are dealing with a difficult personal situation that has made you get behind on payments and consider selling your home. I know it can feel agonizing when you are stuck and don’t know what to do, but I have helped many homeowners in similar situations in the past. As both a real estate agent and a real estate investor, I can help you understand your full array of options, and we can talk through what makes the most sense for you. I hope you will consider calling me and I look forward to walking you through this difficult time. I love to be of service and there is no pressure. Let me be your listening ear and lean on me as we go through this process togeher.
All my best,