When purchasing a house, the thought of foreclosure is usually far from anyone’s mind. But things happen, circumstances can change, and that mortgage payment that once was affordable can become a burden to pay every month. Then the late payment notices start arriving in your mailbox and calls from the mortgage company asking when they’ll receive their payment start bombarding your phone. And so, it begins the start of the pre-foreclosure period.
Dealing with unpaid mortgage payments and a looming foreclosure can be a stressful time for anyone. However, the good news is that you do have options rather than letting the foreclosure process play out. There are several ways you can stop a foreclosure, including selling your house to avoid foreclosure. Below we’ll explain the foreclosure process, ways to stop foreclosure, and if selling your home is an option too.
Understanding the Foreclosure Process
The foreclosure process can be confusing, and each state has different rules and regulations regarding foreclosures and how they are processed. To clarify, foreclosure happens when a borrower fails to pay their mortgage payments, and the mortgage investor or lender must repossess and then sell the property. Foreclosure can even occur when the homeowner fails to pay their Virginia property taxes or homeowners association fees (HOA).
Two important definitions to know while going through this process are pre-foreclosure and foreclosure.
What Is the Pre-foreclosure Process?
The period after you slip behind in payments but before a foreclosure officially starts is typically referred to as the “pre-foreclosure” stage. People also refer to the period before a foreclosure sale actually happens as “pre-foreclosure.” During this time, the lender can charge you fees such as late charges and inspection fees. In most cases, they must inform you about ways to avoid foreclosure and send you a pre-foreclosure notice called a “breach letter.”
What Is the Foreclosure Process?
The foreclosure process cannot be started until more than 120 days have been past due on payments. This is a requirement by federal law but is subject to a few exceptions. This 120-day period allows most homeowners to submit a loss mitigation application to the lender or servicer or figure out other arrangements to avoid foreclosure.
In Virginia, foreclosure is handled two different ways by using a judicial or nonjudicial method. Most lenders in Virginia use the non-judicial approach because it’s quicker and cheaper than litigating the matter in court (judicial foreclosure).
Here is how the process works after 120 days:
- The Homeowner is Notified– The foreclosing lender must serve you a notice of sale, usually through the mail no less than 14-days before the sale. However, as of July 1, 2021, an amendment to Virginia’s foreclosure laws says that the lender must mail the notice no less than 60-days before the sale if the property is owner-occupied. In addition, as of October 1, 2021, it must include information about legal aid and how to contact a HUD-approved housing counselor.
- Public Notice of the Foreclosure-The notice must be published in a local newspaper of general circulation as stated in the loan agreement (no less than once per week for two weeks or three days if published on consecutive days). However, if the loan agreement doesn’t provide publishing requirements, the notice must be posted once per week for four weeks for five consecutive days. The sale can be held eight days after the first publication and no more than 30-days after the last publication.
- The Foreclosure Sale– During the sale, the home basically goes up for auction. The lender can bid up to the full amount owed, including fees and costs, or it may bid less. In Virginia, when the lender is the highest bidder at the sale but bids less than the total debt, they can get a deficiency judgment against the borrower. That means if the total debt is $250,000, but the lender is the highest bidder bidding $240,000, then they can make you pay the $10,000 difference.
One way you can stop a foreclosure is by redeeming the home. To redeem, you have to pay off the total amount of the loan before the foreclosure sale. If the foreclosure sale takes place, some states provide borrowers with a redemption period after the sale, during which you can buy back the property. However, Virginia foreclosure law doesn’t offer a post-sale redemption period after a nonjudicial foreclosure.
Can I Sell My House to Avoid Foreclosure
Absolutely, you can sell your house to avoid foreclosure. And for a lot of Virginia homeowners, it’s proved to be a great solution to stop foreclosure. You’ll just need to move quickly since you’re on a timeline with your lender.
A couple of things you’ll need to do in preparation, however, would include:
- Contacting your lender to let them know your intentions to sell and how that is your plan to avoid foreclosure. Keeping them in the loop and letting them know how you plan to pay off the loan with them will be helpful.
- Get a loan payoff amount from your lender to figure out how much you’ll need to make from the sale of your home to pay off the loan.
- Figure out your listing strategy. You have several options; you can list with an agent, try selling your house without a realtor, or sell to a local home buyer.
- Determine what your home is worth and figure out a listing price. If you work with an agent, they should be able to guide you through this process, but if you’re selling on your own, it will be up to you to determine the right listing price.
- Get your house ready to sell by accessing your home for repairs. Once repairs are finished, you’ll want to get your house ready for prospective buyers by cleaning, decluttering, staging, and adding curb appeal.
- List your house and wait for an offer to come in. Currently, the average time it takes to sell a home in Norfolk, Virginia, is approximately 98-days. So that’s 63-days to get an offer, plus the typical 35-day closing period.
If you find that your home needs several major repairs, you’re concerned about the time it will take to sell, or the cost of hiring a listing agent, you can always sell to one of the companies that buy houses in Norfolk.
Avante Home Buyers is a “We Buy Houses in Virginia” company that will buy you houses as-is, doesn’t charge agent commissions, can make you a cash offer within 24-hours, and close within 7-days. So if you were to sell your house for cash, you’d be able to sell your house quicker than a traditional home sale which will provide peace of mind during this stressful situation.
Ways to Stop The Foreclosure From Happening
Besides selling your home to stop a foreclosure, there are a few other ways you can avoid foreclosure in Norfolk. Below are a few more available options.
Short Sale in Norfolk, VA
Instead of a traditional home sale, you can voluntarily sell your home utilizing a short sale before foreclosure. Although it’s called a short sale, there is nothing quick about it; instead, the term short is because the sale price usually comes up “short” of the balance owed. If that were to happen, all the proceeds from the sale would go to the lender. But something to keep in mind is that the sale won’t go through unless the lender approves. So this process can take a while to officially sell since it won’t be your decision but the lenders to approve the sale.
Assumption/Lease Options in Norfolk, VA
Another option you can look into is seeing if you have an assumption clause. An assumption clause is a provision that a mortgage contract allows the seller to pass responsibility for the existing mortgage to a buyer who wants to purchase the home. In other words, the new homeowner assumes the existing mortgage. But the buyer must typically meet credit qualifications. Besides assumption, you can also offer a lease option or lease to purchase to expand your pool of prospective buyers.
Either way, selling your house could be an option right up until the auction.
You can declare bankruptcy, although it’s an option that should be considered as a last resort. When bankruptcy is filed, federal law prohibits any debt collectors, including your mortgage lender, from continuing to collect- even if the auction has been scheduled. However, this option just buys you more time to replace your lost job or recover temporary disability; it doesn’t free you from your debt obligations. Ultimately your creditors work with you on a fair repayment plan so you can keep your loan, or your property is sold to pay the debt. The reason why bankruptcy should be a last resort option is because of its negative impact on your credit history that can last from 7 to 10 years.
Renting out your Norfolk VA property
Renting out your Norfolk VA property is another option to consider. In the best-case scenario, you find a reputable tenant that takes great care of your house, pays on time, and would pay even more than your mortgage payments. But, unfortunately, you can also deal with the opposite of that and get a bad tenant that trashes your place, doesn’t pay on time, and won’t leave unless you legally evict them.
Related Article: Rent Or Sell My House In Norfolk VA?
If renting your place out is still something you’d like to look into, just keep in mind that you’ll need to be ready to handle phone calls, unexpected repairs, or maintenance issues and cover unpaid rent and vacancies if need be. Since this can be a bit risky, you may want to look into another more stable option.
Forbearance for Property Owners
A forbearance is an option your mortgage company may offer, which is basically where your monthly mortgage payments are on hold for a designated time frame. However, it doesn’t eliminate what you owe; it just postpones the collection of that amount. Sometimes a repayment plan can be arranged, the outstanding balance will be deferred until the end of your mortgage, or a loan modification is made.
Related Article: Mortgage Relief and VA Loans
With a repayment plan, you agree to repay the outstanding amount you owe in regular payments over a fixed period of time or the life of the loan.
When modifying your loan, the terms of your mortgage change to lower the payments. This may be done by lowering your interest rate, extending your term, or forgiving some of the principal amounts. The lender may also agree to waive penalties and fees you have incurred.
A loan modification is completely different from refinancing. First, you’ll need to qualify for a mortgage modification which usually requires you to demonstrate a significant hardship. You’ll also want to ask your lender if they offer this option because not all do.
Unfortunately, a loan modification can negatively impact your credit, but it will be less severe than a foreclosure on your history.
Whether you’re in the midst of pre-foreclosure or a foreclosure sale has been scheduled, it’s good to know you have several options to stop foreclosure, including selling your house. Having a foreclosure on your credit report can last seven years and affect your future plans for years to come. So doing any number of things besides letting the foreclosure process play out would be beneficial.
If selling your house sounds like the best solution, but you’re concerned with how long the process could take or the expense involved, selling to Avante Home Buyers would solve both of those concerns. So if you’re saying, “sell my house fast in Virginia Beach,” contact Avante Home Buyers today to get a cash offer or to find out more about how it works to sell to a cash home buyer in Virginia.