What is Preforeclosure?
Most people have heard of preforeclosure, yet plenty do not understand what this real estate term actually means. It’s important for all homeowners to have at least a basic knowledge of what can happen if you are unable to pay for your home. Let’s take a closer look at what preforeclosure is really all about.
A Plain-English Definition of “Preforeclosure”
Preforeclosure occurs when a property is in the early stages of foreclosure. Foreclosure is a legal process in which a mortgage lender attempts to recoup the investment it has made in a property. In short, preforeclosure begins when the homeowner is not up to date on mortgage payments. The preforeclosure process officially starts when the borrower is two to three months behind on mortgage payments and has been sent a default notice from the lender. Preforeclosure eventually leads to a formal foreclosure and either repossession by the lending institution or the home’s sale at a sheriff’s sale or a public auction.
The Timetable for Preforeclosure
Preforeclosure does not have a concrete timetable. The length of the preforeclosure process hinges on the location of the real estate, as the timetable and details of the foreclosure process differ by state. It is quite possible it will take several months or even several years to transition from preforeclosure to the completion of the foreclosure process altogether. If the foreclosure process passes through the court system, and the claim has to be heard before a judge, the timeframe can be quite lengthy. However, preforeclosure and foreclosure are much faster in non-judicial states, often taking as little as a couple of weeks to a couple of months for the entire process to be finalized.
Preforeclosure Does Not Guarantee Foreclosure Will Occur
If your home enters preforeclosure, it is possible to avoid foreclosure. This is possible by requesting a reinstatement amount from the lender. This amount includes all past due payments pertaining to the mortgage as well as penalties and fees. If payments, fees, and penalties are paid within 30 days to make the mortgage current, the preforeclosure process ends. However, the lender fully expects the borrower to continue making mortgage payments in the months and years to follow.
Selling in Preforeclosure
It is possible for homes and other properties to be put up for sale during the preforeclosure process. If such a home is put up for sale and the current owner owes more money than the property is actually worth, the property is listed as a short sale. If the homeowner has established equity, he or she can list the property for sale through a real estate agent or sell it to an investor. Selling provides the current property owner with the opportunity to access the equity in the home and pay the balance of the mortgage during preforeclosure before the home is foreclosed on.
Preforeclosure Is Your Chance to Reset
If your home enters preforeclosure, don’t perceive it as completely negative. Preforeclosure is only the first step in the overarching foreclosure process, meaning there is still time to take action. The preforeclosure process allows homeowners to remain in their homes prior to the foreclosure process. As noted above, preforeclosure also provides the property owner with the opportunity to sell the property. The bottom line is lenders would prefer to avoid the foreclosure process, as it is costly. This is precisely why some lenders are perfectly happy if the current property owner decides to sell during preforeclosure or agrees to make lower or delayed payments or opt for loan restructuring.
If the homeowner meets his or her debt obligations in the window of time provided by the lender, makes good on the missed mortgage payments, or meets other terms as agreed upon by the lender, the property will no longer be in the preforeclosure process. This means some homes enter preforeclosure without ever moving to the foreclosure period. If you receive notice that your home has entered the preforeclosure process, don’t panic. You have the chance to reset. You might be able to reach an agreement with the lender for a new payment structure that better fits your budget. Or you may sell the property and reinvest the proceeds into a new house or apartment.
We Buy Waco Houses Is at Your Service
If you are considering selling your home, we are here to help. Our real estate specialists are interested in all types of houses, regardless of their condition or size. In fact, we pay cash without any fees or commissions. This is your opportunity to sell your home as-is. Reach out to us today to find out more about how to sell your house. You can contact us by dialing (254) 272-3743 or by filling outour convenient online contact form.
In fact, the lender gives the homeowner leeway of three to six months of missed payments before providing the notice of default. This is a written notification that communicates to the homeowner that legal action will be taken unless payments resume. At this time, the preforeclosure process officially starts, yet there is no guarantee it will continue or segue into foreclosure.