“Hi my name is Paul, and I need to sell my house TODAY!” was the rushed introduction I heard after answering the phone. Paul went on to explain his house was in foreclosure and the bank was closing on him the next day. He had come across our website and was calling to see if we could help. Paul explained he had not called anyone, until now, because the house needed repairs and he did not think it was sell-able.
The value of a quick call:
As a home investor, I routinely work with home sellers in foreclosure situations, but the fact that Paul had waited until the very last day, on a property he owed relatively little on, meant he stood to lose tens of thousands of dollars, unnecessarily. Calling early in the foreclosure process would have saved Paul substantial money in late payments, that were now lost to the bank. Not to mention the equity he would lose by letting the bank have the house.
The father in me wishes people didn't have to find themselves in these situations. The engineer in me struggles with how to reach all of them and provide helpful options they may not be aware of. The investor in me is writing this article in the hopes of possibly bridging this gap.
How does an investor help?
The process of dealing with an investor is actually very simple, even if foreclosures are complicated. When you call, we first like to make sure you have done all you can to avoid the foreclosure (see our tips listed below). Assuming you have, and selling your home is the right solution, we will ask some very basic information about the house. This usually takes less than 15 minutes. Things like the size and age of the house, approximate loans and fees owed, any big repairs needed, etc. From that information we can determine the costs, and value of the house, and provide you a no obligation offer to buy the house.
This purchase offer includes some very important benefits for you, including payment in cash (so no financing delays), with no repairs needed to the house, and closing in as little as a few days. When you sell, instead of the bank taking possession and evicting, you receive cash for any equity available in the house. All house debts are paid off, no foreclosure goes on your credit record, and you have cash in-hand for a new start. The home sale can even include help with moving and accommodations.
So can we save someone who calls one day before foreclosure?
That honestly depends entirely on the bank involved. We quickly work with the bank, lien holders and attorneys, to see if we can delay the proceeding and remedy all the payments. Despite most homeowners feeling like the banks are anxious to foreclose on them, the banks are not well suited for the hassles of reselling homes, and they are far more interested in payment over foreclosure, if possible. The key for lenders is seeing our cash offer, taking the home as-is, so they are assured there won’t be financing delays or concerns with contract contingencies. With all that said, waiting until the last day is definitely not advisable!
Helpful DIY tips for anyone in foreclosure:
1) Do you have some equity in the house? If all the combined loans and liens add up to more than the house is worth, restructuring debt may not be helpful. Climbing out of a foreclosure, if not selling the house, can take a huge commitment in time, money and effort, so you will want to know if this is worth it for you.
2) Choose to dig in, instead of getting buried. Although hiding from the bills and collectors is very tempting, the sooner you take action the better your chances of success are. Finding cash flow is the goal. Achieve this through cutting expenses and adding income. Look into a second job. Consider adding a roommate. Sell any valuable items not needed, like spare vehicles, jewelry, electronics, etc. Eliminate any unnecessary expenses, like cable TV, dining out, unused memberships, etc.
3) Call your lender and explain the situation. See if they can extend your terms and work with you. Showing you are proactive and taking the steps listed above will give you a better chance at this.
4) Try to refinance at a lower rate. Your bank may be more willing to create a new loan than modify an existing one. Also see what a mortgage broker may be able to provide.
5) Cash in a 401K, or IRA, under a hardship provision, if available. Just be aware there are several restrictions and tax penalties for utilizing this option. An early withdrawal will also significantly impact your retirement savings, so make sure to take all of this into account when considering selling versus keeping the house.
The foreclosure process:
In North Carolina, lenders may foreclose using either a judicial or non-judicial process. The judicial foreclosure involves a lender filing a lawsuit in court. This is done when the loan paperwork doesn’t specify a “power of sale” clause. If the court decides the lender is justified in foreclosing, the house is auctioned off to the highest bidder.
In the more common non-judicial foreclosure, the “power of sale” clause is being exercised within the loan agreement. When we, as homeowners, sign our loan documents, we are pre-approving the lender to be able to sell the home, and pay off the balance owed to them, if we default on the payments. Banks normally hire a local trustee to represent them in this process.
In North Carolina, a preliminary hearing must be held before the house can be sold. Notices are sent out and then the clerk of court conducts a hearing to determine whether the power of sale can proceed. Once the clerk of court issues a notice of sale, the homeowner is notified, and public announcements are posted to show the auction date. A minimum of 20 days later, the house is auctioned on the courthouse steps, to the highest bidder. From there, the homeowner has a 10-day period where they can reclaim ("redeem") the house by paying off all debt owed.
Generally, the foreclosures can take 2-4 months before a house ends up for sale on the courthouse steps. Hopefully, the info above will allow less houses to find their way there.