Whether you’ve kept your house, sold your house, or lost your house – what happens when foreclosure finalizes? There are three possible outcomes on the back-end of a foreclosure. Here we’ll go deeper into what happens after foreclosure and what steps you can take to prepare.
Successful Resolution
The best possible outcome of a foreclosure is resolution. The next steps should be taking every measure to avoid it in the future. Often, this means making lifestyle changes to fit a more modest budget and re-examining expenses and income.
While every situation is different, a foreclosure can be a great awakening. Some homeowners resolve their situation and then sell because they realize it was too much home to begin with.
Lasting Effects of Foreclosure
Depending on how you’ve resolved foreclosure, there may be side effects. After a loan modification, a homeowner’s credit could be impacted. Speaking with a lender is critical to understanding what to expect.
When foreclosure is resolved through a sale, the after effects are determined by the type of sale that occurs. In a straight sale, be sure to get a written notification from your lender that states your debt is resolved.
The above also applies if you’re resolving the foreclosure quickly with a 30-day cash offer. Speaking with a CPA or tax attorney about the sale will inform your tax costs. You don’t want to receive and spend $100k in proceeds only to realize you owe $20k in taxes.
If you don’t have enough equity to sell and make a profit, you can work with an agent or investor to negotiate a short sale. You can also surrender your property with a deed in lieu to prevent impacts on your credit report.
A short sale or deed in lieu won’t save a home or yield cash, but it will prevent an 85-160 credit score point drop for the next 7 years. Losing a home with seemingly nothing to show for it stings, but the alternative of not taking action has much deeper consequences.
Foreclosure Worst Case Scenarios
If you’ve exhausted all of your efforts, your lender will foreclose and the county will conduct a sheriff sale. You won’t be evicted right away, but believe it or not… you still have options!
In some states, like New Jersey, there is a 10-day redemption period on foreclosed property. During this time homeowners have 10 days to purchase the property back for the total purchase price, plus interest, and any allowable costs.
Purchasing back the home that you lost may be a long shot, but you can stay in the home during the redemption period without being evicted. In some instances, former homeowners have been able to become tenants, and pay rent to the new owner of the property they lost.
Eviction after a foreclosure is the final step. Up to 90 days after a sheriff’s auction, new owners may begin eviction proceedings. The proceeding could be part of the foreclosure process or filed afterwards. If you have such financial hardship that you have no way to evict and nowhere to go, contact the sheriff’s office. Typically, they’ll have a hearing and extend you more time.
The end of foreclosure requires the same, if not more, attention to time, communication, and action than the beginning and middle do. Your options may be more finite at this stage, but remember: you DO have options.
For more information on what to do after foreclosure, head to www.bluetowersfg.com or email us at info@bluetowersfg.com!
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