Pre-foreclosure, and what it means for you. I am going to share with you what Pre-foreclosure means using the simplest terms possible.
Pre-foreclosure refers to the situation when a borrower’s property is in the early stages of being repossessed by the lender. A property gets in pre-foreclosure when the borrower fails to meet their mortgage requirements within a specific period that was agreed upon.
Whenever you are getting money from the bank, it is always important to know the terms and conditions of pre-foreclosure to avoid situations of getting surprised when the banker takes over your property.
The pre-foreclosure duration of a mortgage is normally indicated in the terms and conditions sections of getting a mortgage. The property will normally get into pre-foreclosure when the borrower is late by 90 days in meeting their mortgage requirements.
How long the pre-foreclosure lasts depend on the state where the real estate property is situated because the foreclosure process is not the same for all USA states. The variation in foreclosure processing time is because it is a judicial process and has to be sorted out in court before the judge.
So, the foreclosure period will depend on how long the judicial process takes in a particular state. However, there are non-judicial foreclosures that normally take a few weeks or months since they do not involve going to court and facing the judge.
It is always unfortunate for someone to lose their property after they fail to meet their mortgage payment requirements. However, if you ever get in a situation where your property is in pre-foreclosure, there is always a way you can save your property – but you need to act fast. Here is what you should do;
Talk to your lender: If you want to save your property, the very first thing you should do is talking to your lender to find ways of modifying the loan and getting it back to the normal repayment plan. This may involve having to pay some extra fees according to the pre-agreed terms and conditions of the mortgage.
Sell the property in its current state: Some real estate dealers buy properties even when they are in a state of pre-foreclosure. Taking the move to sell the property means the buyer has to meet the mortgage requirements on your behalf. Choosing to sell will also help you save your credit score to make it easier for you to access borrowing services in the future.
File for bankruptcy: This should always be one of your last moves because it will hurt your credit score. With bankruptcy, you will be eligible to pay your mortgage in a structured repayment plan.
If you are a real estate dealer, there is always an upside and downside of buying a property in pre-foreclosure. So, you have to make a proper assessment before you make the decision.
The main advantage of buying a property in pre-foreclosure is you’ll get it at a low price since sellers of such properties are always desperately wanting to sell. This will give you a chance of reselling it for a bigger profit margin than you would if you bought a property that is not in a pre-foreclosure state.
One of the downsides of buying a property in pre-foreclosure state is convincing the lender to approve the sale. This is because in most cases, the borrower has to first get approval from the lender before they sell the property. Another challenge is agreeing on a friendly mortgage repayment plan that will make it easier for you to repay the mortgage of the house you have just bought. Some banks tend to give tight conditions that may be a little hard to meet.
If you happen to get a mortgage, always avoid your property getting in the state of pre-foreclosure. This is because it will put you in a desperate situation of either having to lose the property, pay some extra fees, or sell it a discounted price. For real estate dealers, buying houses in the pre-closure state is always a good deal. However, you need to make sure you agree on mortgage repayment conditions that are friendly to you to avoid having to pay lots of extra fees while repaying the mortgage.