How to Sell Your House to Avoid or Stop Foreclosure

How to Sell Your House to Avoid or Stop Foreclosure

How to Sell Your House to Avoid or Stop Foreclosure

If you are behind on your mortgage payments, your lender may choose to foreclose on the loan. This means you will lose your house and suffer a major reduction in your credit score. However, you may be able to sell your home to stop foreclosure and avoid 4 to 7 years of working with bad credit. How does selling your home potentially end your foreclosure dilemma?

The lien disappears when the loan is repaid

As long as the price you sell your home for is more than what you owe back, including late payments and interest, the lien on the property disappears and the lender has no reason to foreclose. That means no foreclosure and no potential damage to your credit score. If you owe more on your mortgage than you can sell your home for, you may be able to negotiate a short sale with your lender to avoid foreclosure.

What is a short sale?

A short sale occurs when you sell your home for less than the outstanding loan balance. The bank then accepts the sale price and allows you to walk away from the property with no further action required. While it can still cause damage to your credit score, it stops the foreclosure and allows you to move on with your life without further obligation to pay the lender. If you decide to do a short sale with your bank, it’s important to get a signed agreement from your lender that obligates them not to hold you responsible for the remainder of the loan balance. This may take some negotiating, but it happens in more than 50 percent of short sales.

Does the bank have to agree to the sale?

In a short sale situation, the lender will have to agree to let you sell your home for less than the loan amount. However, the property owner is free to sell the home at any time before the foreclosure goes into effect. This is because the property has not yet been repossessed and the homeowner is free to sell their property. The only thing that might make it difficult to sell is the presence of a prepayment penalty. Although rare, some mortgages contain clauses that force the mortgage holder to pay a fee if the mortgage is paid off early for any reason. Ask your lender if you have a prepayment requirement on your mortgage.

Foreclosure is not something you want to go through, but sometimes it can be the best option. The good news is that it can be avoided by simply selling the property and walking away. As long as you have a mortgage that isn’t upside down, it may be easier than you think to find a willing buyer long before the foreclosure process ends. This will allow you to pay overdue payments, interest and the total balance on the loan.

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