A foreclosure happens when a lender takes legal action to repossess a house from a borrower who cannot pay mortgages. A bank tries to recover some of its money back after a borrower is unable to make payments. The house is usually resold, and the bank uses the proceeds of the sale to pay off the loan. The process of foreclosure is lengthy and time-consuming, especially when dealing with judicial requirements. Here are some of the steps you can take if your home is foreclosed.

Foreclosure Process

There are usually five phases of foreclosure, although it varies by state. It usually starts when the borrower defaults on the loan. The lender may offer more time after the borrower misses one payment. The lender sends a notice for missed payment followed by a demand letter when the borrower misses the second payment.

When the borrower misses payments consistently for three to six months, the lender can file a notice of default. This gives the borrower about 90 days to reinstate the loan by paying the most recent bill. After the reinstatement period, the lender issues a notice of trustee’s sale. However, the borrower is required by law to publish a notice in the local newspaper for 21 consecutive days. The borrower can prevent foreclosure by paying up within five days before a public auction.

During the auction, the lender calculates the bid for the property depending on the loan balance and any unpaid taxes or liens on the property. The highest bid gets the house, after which the buyer receives a trustee’s deed. The borrower is usually given three days to vacate the property, or they are issued with an eviction notice. The lender can own the property if it fails to sell at the auction and try to sell it via brokers or asset managers.

Redeeming Your Home after a Foreclosure

If you are going through a foreclosure and you haven’t moved yet, you have a few options depending on your state laws. You can repurchase the house, extend your stay, or get paid to move out. Some states may allow you a redemption period after the sale of your house where you can buy it back.

You can redeem your home by paying the total purchase price, including any additional costs by the owner and interest. The procedures and time frame for the redemption period vary from state to state. The redemption period is not offered in all the states.

You can even live in the home free during the redemption period in other states. This gives you the chance to live in the home payment-free and save money to rebuild your credit.

Rent the Home

Alternatively, you can choose to remain in the home as a tenant after it is foreclosed. Some investors and lenders offer initiatives to enable you to rent your former house after it is foreclosed.

If you do not move out after the buyer gets the title to the property, the purchaser may start the eviction process to remove you. Depending on your state, the process can take a long time. You can continue living in the property as you wait for the process to complete. However, it is best to leave during the designated time to avoid being forcibly evicted.

Cash-for-Keys Deal

The buyer can offer you a cash-for-keys deal to prevent the embarrassment of being forcibly evicted from the house. The agreement allows you to vacate the property by a certain date and leave the house in good condition. You can call for an emergency cleaning service to ensure that the new owner finds the house clean and in the best condition. The new owner gives you a certain amount of cash to cater for the cost of moving out. If the new owner does not offer you a cash-for-keys deal, you can request one.

Your lawyer can tell you more about your rights and options after a foreclosure. Lenders usually attempt to make deals or arrangements with the borrower to avoid foreclosure. You can speak with the borrower and ask for more time to catch up on payments. You can also ask the lender to modify your loan terms to make it easier for you to pay.

What to Do If Your Home is Foreclosed by Elizabeth Howard