Facing the Pre-Foreclosure Process. What you need to know…
Unfortunately, sometimes good people have bad luck and can not make their mortgage payments any longer. This could happen for various reasons including, Illness, Lay-offs, accidents, deaths, etc.
Foreclosures can really ding your credit as well. However, all is not lost but time is of the essence.
Some Cash Buyers can help stop and prevent the process of foreclosure or “Pre-Foreclosure” as it is technically called.
Depending on how far you are behind on the payments and what is owed on the home here are two ways that Cash Buyers can help save your credit score.
Short sales are a way for you to negotiate with your bank for them to accept a lower price than what you owe on the home. Then this gives you some time to market your house with either an Agent or a Cash Buyer.
ex. You owe $100,000 on your home. You negotiate with the Bank and they accept the terms to allow you to sell it for $60,000. This allows you to release yourself from paying the full $100k owed. It also helps avoid dinging your credit as hard as a foreclosure would.
Creative Lease Options:
While riskier, a Creative Lease option or “Subject To” clause works easier and faster than trying to negotiate with the bank for a short sale.
With this type of structured deal, the Cash Buyer would assume and pay for all of your past due and missed payments. By doing this it then brings you current on all payments. At that point, the Cash Buyer would assume your mortgage and home via the contract between you and the cash buyer. The Cash Buyer will then continually make your mortgage payments while you have relocated to a better living situation.
The Cash Buyer will continue to pay down the mortgage every month for a period of time until they can pay the balance down to $0.00.
The risky part of this is for both Parties involved. AS the “Seller” you will be required to keep the mortgage in your name until it’s paid off. For the Cash Buyer, it is risky because they paid out a bunch of money to bring the past due payments current, and continue to keep paying the mortgage. Sometimes, albeit rare, the banks are not happy about the private transaction that took place and will call the loan “Due On Sale”. This leaves the cash buyer in a bad spot.
Here at www.631HomeBuyers.com, we always suggest approaching a pre-foreclosure for a short sale. However, if the bank will not negotiate or too much time has passed, your only option to save your credit is a Subject To Lease option