Deciding to Leave Your House

If you decide not to fight the foreclosure process and to lease your home, you should contact your attorney. You may be able to do a deed in lieu of foreclosure where you simply sign the deed back over to the lender and walk away. Just walking away without a legal option such as this, opens you up to foreclosure proceedings against you and the sale of your house at an auction. A foreclosure ruins your credit as well.

Letting Foreclosure Proceed

If you let the foreclosure process proceed without contesting it, the home will be sold at a foreclosure auction. If no one bids on the home, then the bank will buy it back and resell it on the open market as an REO (real estate owned) property. Some states allow for redemption periods which gives the borrower time to redeem their home and pay the loan current. Otherwise, you will be given an eviction notice by the bank or the new owner and have to leave your home within a very short time, usually 3 days once the formal eviction notice has been filed with the court. If you have a government loan, the eviction process may take longer. You should check your state laws to see if there is a statutory redemption period available because this is your last chance to get your home back after a foreclosure.

Short Sales

Short sales are an alternative to losing your home to foreclosure and can help save your credit. In a short sale, your lender agrees to take a lesser amount than you owe on your mortgage. Short sales take at least three to five months or longer to get approved. Many times the buyer walks away because they get tired of waiting for the approval and they find another investment opportunity. You have to prove to the bank that you have a financial hardship and that the value of your home has declined so that you can no longer sell it for more or equal to what you owe on your mortgage, that you don't have sufficient income or assets to continue making the payments or pay the difference owed after the sale.

Offering the Deed In Lieu of Foreclosure

A deed in lieu of foreclosure is an option that can be used to save your home from a formal foreclosure process and having your credit ruined. You will have negotiate this option with your lender. If the lender agrees, you simply sign the deed over to the lender and hand the lender the keys to the house, walking away owing nothing.

Deficiency Judgements

Some states allow lenders to obtain deficiency judgments for the difference between what the home sells for at a foreclosure auction or a short sale and the amount the borrower owes on the mortgage. If you are negotiating a short sale or deed in lieu of foreclosure with your lender, be sure to get the lender to agree not to pursue a deficiency judgment against you. Most of the time lenders do not pursue them because they are costly and take time. The chance of collecting any money from the borrower is slim because they know that the borrower does not have any money or assets. The exception would be if the borrower did have significant assets.

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