Foreclosure. It can be one of the scariest things that an American homeowner can go through. This means that they are being kicked out of their homes, with no certainty in where they are going to live next.
Last year, the number of foreclosed homes in Texas rose by over 187% compared to the same period in 2021.
So, what can you do to prevent this if you are in danger of having your home foreclosed? Well, the first step is to recognize the situation during the pre-foreclosure period.
If you do this, you may be able to come up with a solution to keep your home and avoid foreclosure. Another way you can go is to sell your home yourself before it even makes the auction.
How do you do this? How likely are you to succeed? These are your home selling options if you are in pre-foreclosure.
Before we can go into what options you have to sell your home at this stage, you must be fully aware of what this means. Pre-foreclosure simply means that the lender has started the process of filing a foreclosure. Do not think that this means that a foreclosure is finalized.
Think of it as a written warning that needs an immediate response. Your lender is essentially saying that if you do not pay the money that you owe them within a certain amount of time, they will foreclose your home and put it up for sale at an auction.
However, just because your home has not been foreclosed at this stage does not mean that you should take this situation lightly. It still requires you to act because if you sit by and do nothing, legal action will be taken and legal authority will be given to the local sheriff to kick you out of your own home.
So, what you need to do in this situation is know your rights and know the timeline that you are working with. In Texas, there are generally three stages to a foreclosure process plus a period lenders must wait before they can start this process.
In Texas, most lenders such as banks need to wait 120 days before they can begin a formal foreclosure process. This means that a homeowner needs to be at least four months behind on their payments before a lender can consider taking action to evict them from their own home.
Once this period has expired, a lender can take the first step of the foreclosure process.
Notice of Default
This is a written letter that a lender is legally required to send to a homeowner once the 120-day period described above is over. The letter details how far a homeowner is behind on their payments and how much money they owe the lender.
From there, a homeowner is given 20 days to come up with the money that they owe a lender. If they fail to do so within that period, a lender is allowed to move on to the second stage of the foreclosure process.
Notice of Sale
Once the default period is over, a homeowner has to get a written Notice of Sale. This lets a homeowner know that their home is being listed up for auction at a certain date.
That date has to be at least 21 days away from the time the notice is mailed. Note the distinction here because there can be a big difference between the day a notice is mailed versus the day a homeowner receives this notice.
For example, let’s say that the home is scheduled for auction on August 22nd. A lender complies with the legal requirement of a Notice of Sale by mailing this to a homeowner on August 1st.
However, a homeowner may not receive the notice until August 4th by mail. This still fulfills the legal period that a lender has to notify a homeowner, so it could put the homeowner in a potentially more difficult situation to try to come up with the money before an auction takes place.
Finally, a homeowner that wishes to retain their home or get the proceeds from a home sale themselves needs to avoid getting to this stage. That is because this is the stage where the auction for your home takes place.
In Texas, once someone wins a bid on a home in a foreclosure auction, the previous homeowner loses the legal right to retain the property. After that, they will typically be given three days’ notice to evict the property when the new homeowner is ready to move in.
Selling Your Home
Remember, just because your home may be in the pre-foreclosure stage does not mean that you have no power to sell it yourself. Texas law allows you to sell your home yourself until the day your home reaches a foreclosure auction.
With the timeline described above, that should give you just over 40 days to come up with a game plan on how you will go about this.
The biggest thing that you have to keep in mind is that time is of the essence here. You may not be able to hold out for the best offer or have the time to fix minor issues that a potential buyer may have with your home. With all of this in mind, make sure you fully understand that before going this route.
Benefits of Selling Your Home
The main benefit of selling a home is that you will have much more control over how much money your house gets sold for. You can decide what offer you will accept and you can try to get an offer closer to the money that you owe your lender.
In 2022, the average home in Texas was worth just under $315,000. If your home falls in that price range and that is about the money you owe a home lender, then you can raise the money yourself and get out of debt with your lender right away.
However, if you choose not to go this route and fail to collect the funds to save your home, there is one risk.
Risk of Foreclosure Auction
Some people in the foreclosure process may wave the white flag and just let their lender sell their home at a foreclosure auction. They may think it is the same in terms of giving up their home to get out of debt.
Well, it is completely different than selling your home yourself. The reason is that buyers are fully aware that the lender is holding onto a property that they foreclosed. Therefore, they know that the lender will do almost anything to dump this property and recover any funds that they can.
What this means for you is that buyers may make a much lower bid on your home than if you sold it yourself. They could try to buy your home for say $250,000 instead of $315,000. If this happens, then you are still on the hook for any remaining funds that do not get paid through that auction.
Finally, you may run into a situation as a homeowner where you have very real repairs to make before an average buyer may get interested in your home. The problem is that if your home is in the pre-foreclosure stage, you likely will not have time to make these repairs before the home reaches auction.
So, what can you do? Your solution here is to find a buyer that will buy your home as-is. What this means is that a buyer is willing to do the repairs themselves and you can wipe your hands clean of the property.
The main catch with this option is that you obviously will not get the money you would for a renovated home. However, the big pro with this option is that it is by far the fastest way to sell a home. If you get a reasonable offer going this route, you could find yourself much closer to paying off the debt that you owe your lender.
These are the main things that you need to know about the pre-foreclosure process along with how you can sell your home during this time.
Remember, just because you are in pre-foreclosure does not mean that you stop trying to collect the funds yourself. One of the best ways you can do that is by selling your home.
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