Almost everyone experiences rough patches during life. As a property owner, having financial difficulties may mean losing the biggest investment of your life: your home. Inability to pay mortgage and insurance brings on worried thoughts about looming foreclosure threats coming up in the future.
Do you know which is better for your house in Minneapolis? A foreclosure or short sale? Learn all about the differences in our latest post!
Foreclosures Happen To The Best Of Us
Read your mortgage agreement to know exactly how much time you have and what the process is in regard to the time you might have to work on financial solutions.
Usually, a foreclosure process doesn’t begin until 3-6 payments have become delinquent. First, there is pre-foreclosure, which is when the property is in default and the bank may or may not foreclose on the property. Following pre-foreclosure, there’s period of time called “short-sale”, when the owner has the opportunity to sel their property before the bank forecloses, and the market value is lower than the balance due to the mortgage company or bank. The bank can decide whether or not to accept offers less than the balance due in this stage of the process. When banks accept short sell for a property, it is much better for the credit of the seller. If not, the next step in the process is the foreclosure auction. The objective of foreclosure auction is for the bank to get the most money for the property in a short amount of time. In situations that foreclosure auction does not bring about suitable results for the lender(s), the fourth step of the process is an REO, or “Real Estate Owned”; the bank then repossesses the property and places it on the market for sale.
Foreclosure is the action of a lending institution taking possession. Foreclosure impacts your credit score and shows up in any credit checkso. A Twin Cities foreclosure stays on your credit for at least seven years and sometimes for as long as ten years.
You may have more time to live in your home if you let it get to the point of foreclosure because of the statutory redemption period. This time frame depends if the title is held via mortgage or deed of trust. With a mortgage, the process may be as quick as 30 days, or it could extend for as long as two years.
What does a statutory redemption period mean? The foreclosed property has been sold and is no longer owned by the homeowners who suffered financial difficulty. But, during the redemption period there is still a chance for them to find finances to regain ownership before all is said and done. If you can get together the money to pay the outstanding balance and all costs of the foreclosure process to the mortgage holder(s), and have recovered financially so that you can resume payments, you don’t have to lose your home. If that’s not possible, then you really have to move out. Also, if you took title through a deed of trust, there is typically no statutory redemption period, and you have to move out immediately.
Is A Short Sale Really The Answer?
In the foreclosure process described above, you have the opportunity to list your Minneapolis house as a short sale. The best time for a short sale is the time period when you realize you are unable to make your payments, before the lender files legal action against you and before it officially owns your house. You can list your house on the market and try to get an offer that will satisfy the balance of your loan or get really close to it. You have to be in constant communication with the lender about the offers you receive and remember, you have to wait for lender approval. Receiving an offer that the bank is willing to accept, before foreclosure on your Minneapolis house will relieve you of some of the credit damage of having a foreclosure. Unfortunately, it would still negatively affect your credit.
The best option is to avoid the foreclosure process altogether by negotiating a sale of your property before you begin missing payments on your loan.