What Is Pre-Foreclosure? And How to Avoid Foreclosure

If you’re a homeowner, you may have heard the term “pre-foreclosure” before. But what does it mean? Pre-foreclosure is the first step in the foreclosure process. At some point a property will either go to auction or the lender will repossess it. This means you have to act fast.

I’ll explore everything you need to know about pre-foreclosure. Including how it works, what the process involves, and what you can do if your home is in pre-foreclosure.

What Does Pre-Foreclosure Mean?

If you have seen a listing on Zillow with the tag Pre-forclosed home you may wonder what that means.

Pre-foreclosure is a legal status that a home will earn under certain conditions. When a borrower is late on mortgage payments the house they own may go into pre-foreclosure.

If you have a pre-foreclosed home you may be facing a foreclosed home. In this case, you may be looking for a real estate agent or a cash buyer like us to make an offer on your home.

What Is a Pre-Foreclosure Home?

Now that you know what pre-foreclosure means, let’s explore its impact on homeowners like yourself.

Pre-foreclosure gives homeowners a chance to make good on their late payments.

When a homeowner (borrower) misses payments, their lender can take legal action. They do this to recover the outstanding debt. Pre-foreclosure is the initial stage of this legal process. It begins when the lender issues a Notice of Default to the homeowner.

The Pre-Foreclosure Process

Pre-foreclosure is the period between the Notice of Default and the foreclosure sale. Pre-foreclosure is the first step in the foreclosure process.

During this time, the homeowner has an opportunity to catch up on missed payments. They can also explore other options to avoid foreclosure.

Usually, lenders want to work with homeowners. It’s designed to give homeowners options to stay in their homes before a foreclosure.

The lender will gain authorization for their lien on the property if:

• the homeowner does not make past-due (and ongoing) mortgage payments.
• the homeowner does not negotiate a modification.
• the homeowner does not sell the home during the pre-foreclosure period.

What’s the Difference Between Foreclosure and Pre-Foreclosure?

Pre-foreclosure means you still have a chance to save your home. Foreclosure is the end of the road. In pre-foreclosure, you can still catch up on payments or find another solution like a cash buyer. In foreclosure, your bank or lender will sell your home at auction or the bank repossesses it.

What To Do If Your Home Goes Into Pre-Foreclosure

If your home goes into pre-foreclosure, the first step is to communicate with your lender. You may be able to work out a repayment plan, change your loan, or pursue other options to avoid foreclosure. It’s important to act fast, since the longer you wait, the fewer options you may have.

How to Get Out of Pre-Foreclosure?

The first step is to review your options and assess your financial situation.  You can get out of it in some cases, but it requires action on the part of the homeowner. One option is to catch up on missed payments and bring the loan current. Another option is to explore alternative solutions.

This may involve:

• working with your lender
• a short sale
• a loan modification
• exploring other options to avoid foreclosure.

It’s important to act fast to keep your home out of foreclosure. You may want to seek the advice of a real estate attorney or another qualified professional.

How to Get Out of Pre-Foreclosure (Mortgage Payments)

The easy way is to catch up on missed payments. Yet, this may not be possible. If not, you can explore alternative options. For example, negotiate a repayment plan with your lender or consider a short sale. You should likely seek help from a professional to protect your rights.

What Is a Short Sale?

A short sale is when the lender agrees to accept less than the full amount owed on a property. Short sales are generally used as an alternative to foreclosure. They can be a good option for homeowners who are in pre-foreclosure. Especially, if they are facing financial hardship. In a short sale, the homeowner sells the property to a buyer at a reduced price. Meanwhile, the lender agrees to forgive the remaining balance of the mortgage.

If you are interested in a short sale contact us today and we can walk you through how our process works.

Will A Pre-Foreclosure Affect My Credit Score

Anyone who fails to make payments on an outstanding loan balance can hurt their credit. In most cases, a foreclosure would indeed hurt your credit depending on the sale or surrender.

How To Avoid Foreclosure As A Homeowner

The best way to avoid foreclosure is to stay current on your mortgage payments. If you are struggling to make payments, there are several steps you can take to avoid foreclosure.

These include:

• working with your lender to adjust your loan
• opting to sell the property
• pursuing a short sale
• exploring other options such as a “deed in lieu” of foreclosure
• a forbearance agreement

Stopping Your Foreclosure

If your home has already entered foreclosure, it may still be possible to stop the process.

This may involve:

• negotiating a repayment plan with your lender
• pursuing a short sale
• seeking the advice of a real estate attorney
• working with a cash buyer

It’s important to note that you have to act very fast to save your home.

How Does The Foreclosure Process Work?

There are 6 phases involved in foreclosure. 

• Phase 1: Payment Default
• Phase 2: Notice of Default
• Phase 3: Notice of Trustee’s Sale
• Phase 4: Trustee’s Sale
• Phase 5: Real Estate Owned (REO)
• Phase 6: Eviction

Phase 1: Payment Default

When a borrower neglects to make at least one mortgage payment, they have defaulted on the loan. As soon as this happens, lenders take action by sending out formal letters or making phone calls.

Phase 2: Notice of Default

After the borrower has missed four months of payments the lender issues a Notice of Default. This public notice serves as an opportunity to reinstate their loan. Otherwise entering into formal foreclosure proceedings is inevitable. The notice of default allows up to 30 days for them to make good on overdue payments.

Phase 3: Notice of Trustee’s Sale

Depending on what state you live in, the process to start a foreclosure is different. In some states, all you need to do is file some paperwork with the right court to start the process. This way, the foreclosure process can happen fast. You may need court approval for each step of the foreclosure process depending on where you live.

Phase 4: Trustee Sale

In this phase, the lender will sell the home at auction or repossess it. The property gets sold to the highest bidder. The proceeds pay off the outstanding balance of the mortgage.

Phase 5: Real Estate Owned (REO)

To ensure a fair sale process, the lender will create a minimum bid. It’s composed of:

• the appraised value of the property
• the remaining mortgage payments owed,
• any other liens outstanding.

If no buyers materialize at auction time, then ownership transfers back to the lender. The lender then may opt to work with real estate brokers or asset managers to resell it.

Phase 6: Eviction

When the auction concludes a new owner is identified. This is either the bidder or financial institution if no sale occurs. The current occupants are then issued an eviction notice. They must vacate the property immediately.

So far up to this point, we have discussed pre-foreclosure from a homeowner’s perspective.

But what if you are an investor?

Can I Buy a House in Pre-foreclosure?

Yes, it is possible to buy a house that’s in pre-foreclosure. In fact, buying a pre-foreclosure home can be a good way to find a great deal on a property. It’s important to understand the risks associated with buying a pre-foreclosure home. You should be aware of the steps involved in the process as well.

Is Buying a Pre-Foreclosure Home a Good Idea?

Buying a pre-foreclosure property can be a good idea for several reasons. First, pre-foreclosure homes are often sold at a discount, which can be a great way to find a bargain on a property. You can also avoid some of the risks associated with buying a foreclosed property. Such as liens and other encumbrances.

There are some potential drawbacks to buying a pre-foreclosure home. The homeowner may still be living on the property. This can make it difficult to conduct inspections or make repairs. Additionally, the homeowner may be unwilling to sell the property. This can lead to a lengthy and complicated negotiation process.

How Do you Find A Pre-Foreclosure Home?

The best way is to go to the county recorder’s office. You can look in the public records section for Notice of Sale, Lis Pendens, and Notice of Default.

These are notices sent to the property owner that says they might lose their home. The notices have been recorded in the foreclosure proceedings at the recorder’s office.

If I Make an Offer on a Pre Foreclosure Home How Much Should it Be?

Making an offer of a pre-foreclosure involves a few factors.

These may include:

• the outstanding balance of the mortgage
• the condition of the property
• the current market value of similar properties in the area

Additionally, you may want to consider the homeowner’s financial situation. As well as factors that may impact their willingness to sell the property.

To make a successful offer, it’s important to:

• Work with a qualified real estate agent or attorney.
• Learn to navigate the process and protect your rights.
• Conduct thorough research and take a strategic approach to the negotiation process.

You may be able to find a great deal on a pre-foreclosure property and achieve your real estate goals.

Conclusion

In conclusion, pre-foreclosure is a legal status given to a property. It happens when a homeowner has fallen behind on mortgage payments. It is the first step in the foreclosure process. It provides an opportunity for the homeowner to catch up on missed payments. It’s also the last stop before foreclosure. If your home is in pre-foreclosure, it’s important to act fast. Be proactive and protect your rights and avoid foreclosure.

Final tips:

• work with your lender
• find the best real estate attorney or investor you can
• explore alternative options like a short sale or loan modification
• talk to a cash buyer… like us!

Play your cards right and you can increase your chances of avoiding foreclosure.

At We Are Home Buyers, we take the hassle out of selling your house! We’ll purchase it quickly and won’t ask for any extra fees or hidden charges. Additionally, you won’t have to worry about any repairs or renovations; meaning the money you receive at closing can immediately be used to pay off all your debts!

To get a fair cash offer today, get an online quote or contact us at 888-573-3810‪ to learn more about selling your house when behind on payments.

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I am the proud co-owner of WeAreHomeBuyers.com. As a retired Marine, I devoted over sixteen years of my life to serving our great country.

At WeAreHomeBuyers.com, we take pride in working closely with our clients and forging lasting friendships along the way. We are not just a company; we are a trusted partner dedicated to finding innovative solutions for your real estate needs.