If you are faced with being in a foreclosure sale, you need to understand the best way to protect you and your family moving forward. A Foreclosure Sale is when the bank actually sells the house to someone or takes the house back. It is at this point the house is no longer yours. Foreclosure effects can be long lasting.
While a foreclosure is never a good thing, it isn’t the end of your financial world. Here is what sellers need to know about how a foreclosure sale affects them in Salt Lake City and how to properly plan for future real estate ownership after the effects of foreclosure are gone.
Foreclosure can affect people in different ways. Foreclosure effects can have a big impact on you and your family.
What is Foreclosure
Foreclosure is the process the bank uses to take back their collateral if the house payments are not paid. In Utah this process takes about 4 months. Once you are 90 days late on your house payments, the bank will hire an attorney to start the Foreclosure Process. The first step is that the attorney will record a Notice of Default giving the home owner 90 days to bring the mortgage current. Once 90 days pass and the mortgage is not current, the attorney for the bank will issue a Foreclosure Sale Date notifying the home owner that the house will be sold to the highest bidder in 3 to 4 weeks. All of this is the foreclosure process.
Once the house is sold at auction 3 to 4 weeks after the Foreclosure Sale Date, the house has been foreclosed on. The new owner now owns the house. So how does Foreclosure affect you? Please read on.
Ability to Collect Sale Proceeds
When the bank forecloses on a property (sells the house at auction), homeowners can be left in a financial mess. The bank has taken over on the property because the owner hasn’t made payments. What many homeowners don’t always understand is that there is still an opportunity to get some cash out of the home.
Banks are not in the business of making money on properties they sell at an auction like a real estate investor. The bank only seeks to regain its investment of the mortgage amount and back payments. If a foreclosed property provides more money than what was owed, the excess funds should go to the former owner in Utah.
It is an important thing to remember to maintain the property as much as possible. Most foreclosures are purchased in complete disrepair because former owners take frustration and anger out on the property being seized. Keeping the property in pristine condition can yield higher sales and thus money back to the former owner. There are often fees to get the money you deserve, and you will probably need to pay legal fees to an attorney to request the money due to you.
How Foreclosure Effects Credit Over Time
Foreclosure hits your credit significantly. In addition to the late or non-payments of the mortgage, the sale at auction or seizing of the property can drop credit scores two hundred or more FICO points.
The foreclosure itself remains on credit scores for seven years, the same as a bankruptcy. Rebuilding your credit can happen immediately with a good payment history on a credit card or on auto loans. Most mortgage lenders will not consider a loan to someone with a foreclosure on their credit history for at least three years from the date of the foreclosure or the day the house is sold at auction.
Depending on the circumstances behind the foreclosure, some lenders will consider another mortgage sooner, but not before two years of the foreclosure sale date. Hardships that caused the late house payments, included a loss of job or severe family illness or death, may be taken into consideration. These need to be well documented and the circumstances leading to the foreclosure must be rectified prior to getting approval for a new loan. A foreclosure most of the time affects your credit the same as a bankruptcy.
Potential to Getting a Home Back
In some states there is one way some homeowners are able to reclaim their home even after the foreclosure sale has occurred. This is called a foreclosure redemption and is available for homes seized through a judicial foreclosure.
If the home is eligible for redemption, the former owner has one year to complete the redemption in most states that allow this. The redemption requires paying the new owner for the total balance of the previous mortgage and reimburse the new owner for any repairs and upkeep. Unfortunately Utah does not allow a redemption period in most cases.
Options to the Negative Effects of Foreclosure
While a foreclosure is a tough process to experience, it isn’t the end of the world and it is possible to buy another home. In most cases, with smart credit repair, buying another home can happen much sooner than many foreclosure participants expect. Most of the time a homeowner will get the most money AND not hurt their credit as much as a Foreclosure Sale will by selling their house to a professional house buyer if you are running out of time. Gary Buys Houses can buy your house in foreclosure right up until the sale date. And with our Sell Now Move Later Program, you can stay in your house after you get your money for a few months for free. This could help a ton with getting moved. Get a hold of us today to get started.
No Obligation Consultation. Don’t go through the effects of foreclosure on your own.