What About the Tenants Living In Your Foreclosure Property?

What is Foreclosure? Foreclosure is often referred to as a situation in which a homeowner is unable to pay up the loan or mortgage. Foreclosure is a legal process which makes the homeowner lose all rights to the home or property. It is also known as a real estate owned (REO) property.

If you are looking for a home, you can think about buying a foreclosed property. A Real Estate Owned (REO) property is owned by the money lender based on the fact that the previous home or property owner’s nonpayment on the loan. This is why a type of home like this is referred to as a bank-owned property or a foreclosure property.

In case the home you are living in, as a Tenant, has undergone Foreclosure, the following are some of the situations you may likely end up in.

  • The New Owner may allow you to keep on living in the house as a tenant

The new owner may be unwilling to start looking for new tenants since there is one readily available. On the off chance that the new property owner is not interested in searching for a new tenant or even selling the house, then be rest assure that you won’t be affected by the after-effects of the Foreclosure.

All you need to do is to change who you pay your rents to from your old landlord to the new homeowner. Try as much as possible to enquire about some proof of documentation once you must have been introduced to the new homeowner.

  • You may be asked to vacate the property

Some new home owner loves fresh starts. These type of individuals may ask you to vacate their property. It is totally their call since they now own the rights to the property. Although, you need not panic. You are still able to stay in the home for up to 60 days. This will give you enough time to find a new home to move to.

At times, there a couple of exceptional circumstances in which the new homeowner can barge you out before elapsing your 60 days period of notice. “Nuisance or waste” is a type of offense that if you commit, there is a likely possibility of getting evicted from the property. This consists of any major destruction or any other criminal related offenses.

  • Barter you out

At times, in a case that the new property owner does is not willing to wait for the 60 days period of notice to elapse, and will like you to vacate the property as soon as possible, you may be given a reasonable compensation or cash to make a deal. This looks just like the barter system.

At this point, everything depends on you. You can decide to accept the deal and vacate the property immediately, you can likewise decide to stay until your 60-days’ notice period elapses. In case you opt for the compensation and immediate vacation, try as much as possible to get it documented with both the owners’ signatures.

  • The latent owner

At times, the new property owner may decide to remain anonymous to you. Even though this hardly happens because of RCW 59.18.060 which clearly states that it is compulsory to inform the tenants concerning any sort of change or transition in the ownership of the property or home.

If a situation like this happens, it is now your responsibility to make thorough investigations about this hidden information. However, try as much as possible to keep an account of your rents so as not to become disorganized if the new landlord shows up anytime asking for the rents.

If you happen to be the tenant of a house undergoing foreclosure, it will be wise of you to learn about and understand your rights as a significant occupant of the property. You can likewise contact an attorney without postponing it further.

How To Sell a House in Foreclosure

For many people who find themselves in the ‘foreclosure’ situation, asking the right questions is crucial and one very important question to ask is, Can I sell my house in foreclosure? And if so, sellers in distress need to understand how to sell a house in foreclosure. As long as the bank hasn’t put up a for-sale or auction sign on your home, your house is still yours to do with as you please, no matter the equity loss. So it is possible to sell a house in foreclosure.

Hence, it is not a wise option to let your house go into foreclosure, which would take many months or even years to complete. So, how do you sell a house in foreclosure? Try a short sale. Lenders prefer a short sale to a foreclosure and would be eager to respond if you have an experienced agent by your side. Here are the steps to take:

  1. Meet with your lender to discuss the possibility of a short sale. Know that if you don’t default on your loan, your short sale request won’t be approved. Meet with a decision maker in your bank and let him/her know the reason why you need to do a short sale.
  2. Recruit an agent and a legal professional to assist with the sale. Although money is limited, using specialized help will profit you over time. Unless you have the funds to pay them in advance, discuss the opportunity of paying them from the sale proceeds.
  3. Set a price. You want a price as near the money you owe on the mortgage as possible, in addition to the agent’s percentage and other sales costs, but that may well not be possible in a fragile market. Speak to your agent about what you can expect realistically, then put the house on the market.
  4. Present a price to the lender. Present the top bid on the house to the lender for approval. This will be a better option than foreclosure because in a foreclosure auction, the top bid may be way below the value of the house but the lender accepts it anyway since he has to make a sale. Present a good price to the lender and then.
  5. Talk with your lender about a deficiency judgment. Be sure to clarify whether or not your lender will come after you for the deficiency on the short sale. Your real estate agent will help you negotiate this.

Foreclosure vs. Short Sale

There exists a lot of misunderstandings about foreclosures and short sales. Which should you use and why? Will your credit score be impacted just the same way by both of them?

When you buy a house, you typically make a deposit and then set up a mortgage amortized over a number of years. The house is used as collateral and if the homeowner is unable to make monthly mortgage payments, the credit institution has the right to seize the property in order to recoup their losses.

Now let’s compare these two options:

What is a Foreclosure?

Foreclosure is the means by which a lender gets title to a property because of homeowner’s loan default. The lender recoups their own loan investment by simply selling it at the trustee sale. If there are usually no other potential buyers, the bank takes the exact property into inventory as real estate owned (REO). Banks are not in the business of property proprietorship nor management, and they are legally obligated to sell off these kinds of non-performing assets.

What is a Short Sale?

On the other hand, short sales are properties sold before foreclosure at a discount for the reason that current market value is lesser than the loan amount. The homeowner still has the title but the sale must be endorsed by the bank, who endures a capital loss upon sale. To keep away from the extra cost of the foreclosure process, banks are willing to sell properties at or below market value.

Foreclosure Facts

According to Re/Max, the average price of foreclosed houses was $185, 000 while that of other regular properties was $267, 300 in May 2011. In addition to prices, bank owned properties can be bought much more quickly over a typical short sale made.

Despite the low price, bank owned properties have their share of problems. These foreclosed properties typically sit vacant for weeks or even months, lack regular maintenance, attract squatters as well as copper thieves and need repairs. Most banks promote their foreclosed properties in an “as is” condition. So, anyone who will buy must find what repairs are essential and invest money and time to fix those difficulties.

Short Sale Facts

This type of distressed property is in relatively better condition, and often repairs are not necessary. Since properties are still occupied by homeowners, the house is usually maintained. Roughly 80% of these properties are of good quality.

However, short sales have their drawbacks. This type of foreclosure may take a long process, requiring months to complete. You need to be qualified and have a much longer time horizon to buy the property. Reason for the long process is that all pledgees must approve the sale. But, the short sale process can be sped up if the seller’s agent is experienced in negotiating with the bank and closing short sales.

Foreclosure Process

Depending on the state a borrower lives in, foreclosure may or may not involve the judicial system. Following three to six months of missed installments, a loan specialist will record a notification of default, which informs a borrower that he is confronting foreclosure and gives him a reestablishment period to make things right by paying off obligations or settling any dispute. The length of the reinstatement period changes by state, with a few states giving borrowers a negligible five days to settle disputes and obligations and others giving up to 90 days.

If the home loan’s unpaid balance is not paid off within three months, the mortgage holder gets a notification of sale. The property is then sold at a trustee sale to the highest bidder, who must pay in real money inside of 24 hours. The opening offer is generally equivalent to the outstanding balance and any extra lawyer charges the bank might have incurred.

Short Sale Process

When the market value of the property is less than the outstanding mortgage principal, and the borrower cannot afford to pay the loan, the lender (one or more banks) can choose to accept a short sale. In a short sale, the proceeds from sale of the property falls short of the mortgage balance, which is one reason lenders may hesitate to accept the offer for a short sale. Any unpaid balance owed to the lenders after a short sale takes place is known as a deficiency. Short sale agreements are not necessarily borrowers releasing themselves from their obligations to repay any shortcomings of the loans unless explicitly agreed between the parties.

Distinctions Between Short Sale & Foreclosure

  1. For borrowers: The current government is actively trying to halt the tide of foreclosures in the United States. For this purpose they began the MHA program, which stands for Making Homes Affordable and is an attempt to reduce the mortgage payments on both primary and secondary mortgages. The hope is that more people are able to stay in their homes will be.Those borrowers who are still unable to keep their homes, even with the help of the MHA program can use a short sale as a way to get out from under their obligations to the lender. If this was the primary residence of the homeowner, they are not liable for taxes on the forgiven debt, and may even be eligible for a $ 1,500 to help pay for moving expenses.
  2. For Lenders: Lenders participating in the MHA program are required to reduce the mortgage payments in an effort to make payments affordable. Under this program, lenders can also get up to $ 1,000 in incentives, even without loan modification. To make this possible, the lender must allow a short sale if the borrower prefers this option.
  3. Credit Scores: Neither foreclosures nor short sales offer an advantage over the other in terms of the negative influence on a person’s credit score. Industry experts along with Freddie Mac and Fannie Mae say that this decline in credit ratings will be between 200 and 300 points.
  4. Waiting time between mortgages: Freddie Mac and Fannie Mae guidelines stipulate that a borrower must wait for 5 years before qualifying for any new mortgage following a foreclosure. In the case of a short sale, the waiting period for a new mortgage is merely 2 years.

Conclusion

As a homeowner, if you qualify for aid that will lower your payments, maybe you will be able to avoid a foreclosure. If not, trying to work out a short sale with your lender probably is your best bet.

From the lenders standpoint a short sale might be best because foreclosures might be both costly and time intensive. Ultimately the impact of your foreclosure to your credit rating and ability to borrow later on is reason to choose the short sale above the foreclosure. Lenders will look more favorably on the borrower that tried to cooperate with the bank (via short sale) than one who just walked away.

 

Foreclosure Process In Virginia

If you have become delinquent with your mortgage payments and have received notice that your property may be foreclosed on, you may be wondering what the foreclosure process in Virginia entails. The process can vary slightly from location to location, so it is important to understand what the process is and what stage in the process you are currently in. By doing so, you may learn more about any options that are currently available to you through this process.

The Power of Sale Clause
Most mortgages are initially signed with a special clause in the wording known as a power of sale clause. This clause has specific notice requirements that must be followed before the foreclosure. For example, the foreclosure sale must be advertised in a specific interval over the course of one to two weeks in a local newspaper. The advertisement must also be served to the property owner 14 days before the sale is to occur. There also rules regarding when the actual sale can occur that property the property owner’s rights. Under the power of sale clause, the property can be auctioned off to the highest bidder. The bidder must make a cash deposit of at least 10 percent of the bid.

A Judicial Process
The power of sale clause option is a non-judicial option, but there is also a judicial option for the foreclosure process in Virginia. With this process, the property will be sold in a publicly noticed sale, and a local sheriff usually facilitates this process. This type of judicial process usually includes a lis pendens being recorded against the property.

The Time Frame
The typical foreclosure process in Virginia takes approximately 60 to 90 days. While some will walk through this process, others may want to avoid foreclosure. A short sale is an alternative to a foreclosure. It essentially means that the owner is selling the property for less than what is owed to the lender. The lender must agree to the short sale beforehand. While a short sale can impact the credit of the property owner and result in a loss for the mortgage holder, it may be a more attractive option than the alternative for both parties.

If you are facing a foreclosure, understanding the foreclosure process in Virginia is important. You may consider working with a real estate agent and an attorney to learn more about how you can avoid foreclosure and minimize the impact to your credit rating.