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Getting a foreclosure letter or even warnings of foreclosure on your home can make you feel helpless. We’re here to let you know that there may be ways you can avoid foreclosure. Read on for an in-depth look at foreclosure proceedings and alternatives that may be available to you.
What Is a Foreclosure vs. Pre-Foreclosure?
Foreclosure is when the mortgage lender takes possession and control of the property because the homeowner has not made their mortgage payments. This is usually done in stages, but the exact process depends on multiple factors, including location — different states may have different laws around foreclosures.
The foreclosure process in Arizona can be nonjudicial, meaning the lender does not have to go through the court system in order to begin the process. In most cases, after the lender has sent you the notice that includes your payment deadline, the lender will attempt to put the property up for sale or on auction. Once the property is sold, the previous homeowner receives an eviction notice and must leave the property immediately.
On the other hand, pre-foreclosure marks the beginning of this process. When this occurs, the homeowner receives a pre-foreclosure letter warning them of potential foreclosure (also known as a notice of default). However, the homeowner at this time still legally holds ownership of the property. This means that you can attempt to sell your home yourself or look for other foreclosure alternatives.
3 Foreclosure Alternatives
You should avoid the foreclosure process at all costs because it not only results in the loss of your home but also significantly impacts your credit history. Take a proactive approach and take into consideration these alternatives to foreclosure:
1. Modifying your loan/refinancing
Speaking with your lender about your financial hardship can lead to loan modification or refinancing options. Keep in mind that communication is key. If you refinance to avoid foreclosure, this can also lower the interest rate and payments to make them more affordable.
A temporary suspension or a complete pause of mortgage payments through forbearance is another possibility that lenders may offer to homeowners facing financial troubles.
2. Deed in Lieu of Foreclosure
With a deed-in-lieu of foreclosure, homeowners transfer ownership of their property back to the lender, effectively ending their mortgage obligations. While this option does result in losing your home, it avoids the emotional stress, costs, and ding to your credit score associated with foreclosure.
3. Sale Lease Back Agreement
A sale lease back agreement offers an excellent foreclosure alternative when traditional selling isn't possible within the tight foreclosure timeline. A fast cash buyer purchases the home and leases it back to the homeowner. Foreclosure is avoided, and the homeowner now becomes the tenant, and the fast cash buyer is their landlord. These agreements are usually for a limited time, but they do allow a smoother transition so that lives are not upended, and there is less stress all around. In many cases, the rent payments are lower than mortgage payments, allowing for some breathing room and time to plan.
A Sale Lease Back Could Be Your Ideal Foreclosure Alternative
Although every situation is different, a sale lease back agreement is worthwhile for homeowners seeking to avoid foreclosure. This approach addresses financial challenges while providing control over housing arrangements. The idea of foreclosure can be overwhelming, but homeowners should know that there are foreclosure alternatives that may make life easier.
If you think you may be facing a foreclosure, don't hesitate to reach out and explore these alternatives with The District PHX.
Contact us today to discuss your situation and find the best path forward.
