6 Little-Known Ways To Stop a Foreclosure

Stuff happens. And everyone goes through a rough patch in life with financial obstacles.

Whether you’ve hit a bump on the road with paying your mortgage, or you’ve lost your job, or some other financial distress — it doesn’t matter — we want to help you and give you ALL the information you need to make the best decision for you.

Even though everyone’s situation is different — the process of a foreclosure and the ways to stop it don’t change.

Foreclosure in most states means that once you’ve missed a certain number of payments, the bank/lender will then file a legal notice (“Notice of Default” or NOD) . Some states will just have a “notice of sale/auction” with a set date of when the auction will be.

Getting served a NOD isn’t the end… unless you don’t do anything

After a NOD/NOS/Notice of auction is filed, depending on the state, you could have as little as 90 days to resolve it. During this time, some lenders will actually try to contact you to work something out. If they are reaching out, take advantage of the opportunity and try to solve the issue by extending the loan or restructuring the loan.

In some states, it is a “2-notice system”. Where first a NOD is filed, THEN a Notice of sale/auction after that. Other states only file 1 notice, and that’s it. It’s very important to know which system is used by your state (here’s a resource that will explain this further and also tell you which system your state uses).

Whether your state files only 1 notice or 2… the last notice is the “11th hour”. 

After this point, you have a set date when the auction of your house will take place.

Where investors will be placing low-ball bids.

The worst part, you won’t get any of it. 

Your equity is gone after this point.

You don’t want to reach this stage. 

6 ways (actually 7 with a bonus at the end) to stop a foreclosure

1. Bank Negotiation – If you act quickly after receiving the NOD, you can actually work out a compromise with the bank. They WANT to help you. They don’t want to deal with the hassle of taking over the property or going through the auction process. They can work out a new agreement that modifies your loan to something you can afford and makes sense to them. It’s as easy as calling the number they give (they should have mailed you a few times by now),

2. Short sale – If you owe more than what the house is worth, you’ll have to do what’s called a “short sale” which means you sell for less than the loan amount. And the truth is, the bank will consider a “short sale” because even if the bank takes over your house, they will sell it immediately to recoup their funds. Since the bank is already expecting to take a loss, they would consider a short sale because they’re able to skip the hassle. After the NOD has been initiated, it’s important to start searching for offers immediately for banks to consider.

3. Bankruptcy – This stops foreclosure dead in its tracks. Once you file for a bankruptcy, the law will prevent any debt collectors, including your mortgage lender, from continuing any attempts to collect. This might sound like the ideal situation, but here’s the truth…

You’ll have to go to court, and your debt collectors (the bank) will also appear in front of the judge. The judge’s job is to be the “referee” between you and the bank, and you still might end up owing after all that. Filing for bankruptcy only buys you time, and the judge could create a “payment plan” for all that you owe. It doesn’t necessarily “erase” the foreclosure… and… the bankruptcy will taint your record and your credit rating for years to come.  Consult with a bankruptcy attorney to determine whether filing for bankruptcy is a good strategy for you.

4. Deed in Lieu of Foreclosure – You can offer to sign over the house deed to the bank. They become the new owners overnight, but you won’t receive any equity, and you’ll have to leave the house quickly or face eviction. This method certainly stops a foreclosure, but definitely not the most ideal. First off, banks are reluctant to take over a deed. They don’t want to become property owners, only collect mortgages.

This method is usually done when you’ve:

• Had your house listed for sale for a while, and it’s not selling
• Demonstrate that you’re in financial hardship and can’t find any way to make payments

In those cases, the banks will consider a Deed in lieu. However, even when all these factors are present, many lenders will still not agree to a deed in lieu.

5. Assumption of the loan –  Most loans these days are no longer assumable. The average mortgage now has a “due on sale” clause that requires the borrower to pay the loan off entirely if and when they transfer the property. However, if you are facing foreclosure, you might be able to persuade your lender to modify your loan, delete this clause, and let another buyer assume your loan. The lender might assess the new buyer’s qualifications, but it can be a win-win-win option for all. You could negotiate a down payment from the buyer, which you can use to pay off your outstanding past-due mortgage balance.

6. Lease option – This is one of my favorite ways. In a lease option, the buyer becomes your tenant (at first), and you continue to own the property until the buyer has saved enough down payment money, improved their credit sufficiently, or sold their other home.

How does this stop a foreclosure? Well, typically, the buyer will pay you an upfront payment to earn the “option” to buy your home. When the buyer pays you for the “option”, the upfront payment could be enough to bring your mortgage current and remove the NOD. Then, you have a tenant (who has already paid to reserve their right to buy your property, with paying on time as a requirement to reserve their option), who’ll pay the mortgage. Of course, in this scenario, you can’t live in the house with your tenant… but it is a very quick and easy way to stop the foreclosure AND keep your asset!

I promised a 7th way, and it’s something we’ve most likely offered to you already. 

And it’s our hassle-free cash offer program. 

We can buy your house in as quickly as 7-14 days…

… Without you having to negotiate with the bank or to pay for an attorney … 

… or to go out and find buyers, or to have your property listed…

… nor pay for closing costs or agent fees…

.. and you can even leave all your unwanted things behind. 

It’s one of the easiest and quickest ways to get out of foreclosure AND get money in your pocket (if you’re not too much “underwater”)