We all have rough times every now and again. As a property owner, having a rough time may mean losing the biggest investment of your life: your COLUMBIA house. If you are unable to make your mortgage and insurance payments, you are about to face foreclosure with your lender if you miss a certain amount of payments; this all depends on your mortgage document.
Foreclosures Happen To The Best Of Us
In most cases, the foreclosure process will not begin until you have missed between 3-6 payments. First of all, it is important to understand that foreclosure is a process. The first step is called pre-foreclosure. This means that the property is in default and the bank may or may not foreclose on the property. The second step is a short sale. This is where the owner is trying to sell the property before the bank forecloses, but the market value is a little short of the balance due on the loan. Depending on the bank, they may or may not accept offers less than the balance due at this point. If the owner can get the bank to short-sell, it is much better for their credit. The third step is the foreclosure auction. This is when the bank is trying to get the most money for the property in a short amount of time. The fourth step is an REO, which stands for “Real Estate Owned”. If the property does not sell at auction, the bank then repossesses the property and places it on the market for sale.
Based on the process outlined above, “foreclosure” is the bank taking title or “possession” of your COLUMBIA house. This would impact your credit score and would also show up in any reports that future landlords would run. The foreclosure stays on your credit for at least 7 years before falling off, sometimes 10 years. Depending on your situation, you may have more time to live in your home if you let it go to foreclosure because of the statutory redemption period. This time frame depends on whether you took title via mortgage or deed of trust. If you have a mortgage, then the process may take as quick as 30 days, or as long as 2 years. At the end of the redemption period, if you have not reinstated your loan and are still not able to make your payments, then you really have to move out. If you took title through a deed of trust, there is typically no statutory redemption period, and you have to move out immediately.
The foreclosure process typically begins after a homeowner misses between 3-6 mortgage payments, and it unfolds in several stages. The first stage is pre-foreclosure, where the property is considered in default, and the bank may begin legal action. During this period, homeowners still have options, such as catching up on payments or negotiating a loan modification. If these efforts are unsuccessful, the next step is a short sale, where the homeowner tries to sell the property for less than what is owed on the mortgage. This process requires the bank’s approval and, if successful, can have a less severe impact on the homeowner’s credit compared to a full foreclosure.
If the short sale doesn’t happen, the property moves to a foreclosure auction, where the bank attempts to sell it quickly to recover the loan amount. If the property doesn’t sell at auction, it becomes Real Estate Owned (REO) by the bank, and the bank will list it for sale on the market, often at a discounted price. Throughout this process, a foreclosure will significantly affect the homeowner’s credit score, remaining on their credit report for 7 to 10 years, which can hinder future financial endeavors.
Depending on the specific legal framework of the mortgage or deed of trust, the homeowner’s living situation can also vary. If the homeowner took title through a mortgage, the foreclosure process could take anywhere from 30 days to 2 years, during which time they may continue living in the home. However, if the property was acquired through a deed of trust, the homeowner usually has no statutory redemption period and must vacate immediately after foreclosure. Understanding these stages and their implications can help homeowners better navigate the foreclosure process and explore alternatives to mitigate its impact.
Is A Short Sale Really The Answer?
During the foreclosure process as described above, you have the opportunity to list your COLUMBIA house as a short sale. The best time for a short sale is the time period when you realize you are unable to make your payments as outlined in your loan agreement, and before the lender files legal action against you and officially owns your house. You will be able to list your house on the market and try to get an offer that will satisfy the balance of your loan or get really close to it. This might be a difficult process because you will have to be in constant communication with the lender about the offers you receive and will have to wait for them to approve or counteroffer the offers you receive. If you do have an offer that the bank is willing to accept, selling your COLUMBIA house to that buyer would relieve you of some of the credit damage of having a foreclosure, although it would still negatively affect your credit.
By listing your house as a short sale, you can try to obtain an offer that satisfies or comes close to the remaining balance of your loan. However, this process can be challenging, as it requires constant communication with the lender regarding any offers you receive. The lender will need to approve or counter these offers, which can prolong the process. If you manage to secure an offer that the bank is willing to accept, selling your house in this manner can help reduce the credit damage that a foreclosure would cause, though it will still negatively impact your credit score.
While a short sale can provide a way out of an increasingly difficult financial situation, the process is often complex and requires ongoing communication with your lender. Unlike a traditional home sale, a short sale involves the lender because they must approve any offer you receive, as they will be accepting less than the full amount owed on the loan. This can lead to delays, as lenders may take time to review offers, make counteroffers, or even reject proposals if they feel the offer is too low. Additionally, the lender may have specific requirements or conditions that must be met before approving the sale, such as demonstrating that you have a genuine financial hardship or providing documentation of your financial situation.
If you do manage to secure an offer that the lender is willing to accept, completing the short sale can help you avoid the more severe consequences of a full foreclosure. While a short sale will still negatively affect your credit, the impact is generally less damaging than a foreclosure. A foreclosure can remain on your credit report for up to 10 years, significantly lowering your credit score and making it difficult to secure loans or even rent property in the future. In contrast, a short sale may only stay on your credit report for 3-7 years, depending on your credit history and how the lender reports the sale.
Another advantage of pursuing a short sale is that it can provide more control over the sale of your home. Rather than having the property auctioned off or repossessed by the bank, a short sale allows you to participate in the process, potentially finding a buyer who can close the deal quickly. This can provide some financial relief and a sense of closure, as you won’t have to go through the stress of a foreclosure auction or eviction.
The best option would be to avoid the foreclosure process altogether and negotiate a sale of your property before you get to the point of missing payments on your loan.