Foreclosure or Trustee Sale…Does it Matter?

YES…If your name is on title to the property! 

There are two types of “foreclosure”:  Judicial Foreclosure, and Trustee Sales

Judicial Foreclosure

Judicial foreclosures are rare in California…the law requires quite a bit of work on the part of the lender….and a 12-month timeline.  Judicial foreclosure allows the lender to pursue a deficiency judgment…but in practice this method is only used in a minorityof foreclosures.

Trustee Sales

When most buyers purchased their California home they took out a loan…and offered the lender the right to reclaim the property through a Trustee Sale if they don’t make payments according to the lenders repayment schedule. 

This process is faster than a Judicial Foreclosure…but California also gave buyers increased protection against abuse…specifically…lenders waive the right to pursue a Deficiency Judgment against the borrower….AS LONG AS THE LOAN WAS FOR PURCHASE MONEY (more on this later).

Here’s what I (unfortunately) hear from distressed owners too often: 

“I don’t need to worry about Foreclosure…my Lender already contacted me…they’re giving me a Loan Modification”

A successful Loan Mod is the greatest thing that can happen to a homeowner who wants to stay in their home, and can afford the payments…but were you given ALL THE DETAILS…or just a promise?

Every day I hear from folks that were promised loan mods…but the lenders could not deliver…or if they did, the mod they finally saw didn’t save any money at all…and by the time they find out their credit is ruined, their savings are gone, and they’re facing imminent foreclosure.

Here are some important things to know about loan mods:

• Lenders usually require you to bring your payments current…with no guarantee they will give you a modification you will accept
• If you’re behind in payments the foreclosure clock keeps running…and the lender can keep moving forward…ready to foreclose within days of a failed loan mod
• Most of the “modifications” are temporary interest rate reductions…and any missed payments and fees are tacked onto the back end of the loan
• Many mods take the loan out to 40 or 50 years…Increasing the amount of  interest paid on the original loan
• About 60% of loan modification fail within 6 months…leaving owners worse off than at the start of the process
• Very few mods reduce the mortgage balance owed…they just reduce payments…temporarily

If there’s an affordable way for you to keep your home I want to help you make that happen…check out my Loan Modifications page for more details…but many folks are in situations that just won’t work for a Loan Mod.

Loan Mod, Short Sale, Foreclosure, Bankruptcy…How can I tell which choice is best for me?

Great question…now we’re getting to the point…and this is a simple process.

Here is where I get to give you the big disclaimer…if I didn’t give you a disclaimer you’d know this wasn’t a professional service…right?

 I AM NOT A LAWYER AND DON’T GIVE LEGAL ADVICE…plain and simple.

BUT…I have LOTS of Real Estateexperience…I’m here to serve you…and can give you some GREAT common sense advice…and GREAT referrals to selected professionals (including lawyers) that can answer any questions!

Here’s a great action plan for deciding what’s best for your situation:

1. Balance your books…know what you take in and what you spend on a monthly basis…you have to do this anyway for any loan mod program…or short sale…so get a head start
2. Look at your financial situation…job security, pay, savings…every lender will require this!
3. Decide what you can reasonable pay for housing…count everything…taxes, mortgage, insurance…this should be no more than 36% of your monthly GROSS income…40% MAX
4. Contact me…we can sit down in a completely confidential discussion and go over everything you learned…if you have any questions I have great CPA referrals that can explain the TAX CONSEQUENCES of each choice…I have great Attorney referrals that can explain the LEGAL CONSEQUENCES of each choice!  Learn before you decide!
5. Do the math…put this all down on paper…at this point the answer is usually pretty clear!

If you decide that a loan mod is the best choice I have great resources to help you…If a short sale is the best choice we can get started right away…and make it easier for you to get on with your life…but time is incredibly important for a successful short sale.

Why is Timing so Critical for Short Sales?

Timelines are important in all foreclosure situations…if you miss payments the lenders are going to take action.  After the third missed payment they will start the Trustee Sale process…and if you’re doing a short sale you need time to complete the sale before foreclosure.

Here’s a chart from the California Association of Realtors with the important dates for owners who have missed at least three payments and are facing a trustee sale:

  Did you notice the 122-day minimum overall timeline from the third late payment until the trustee sale?

Most short sales take about 180 days from start to finish…this is why it’s so important to get started on a short sale right away…before owners have missed that third payment…if not you risk running out of time.  If you get started right away you have a “window” where you can stop making payments and still live in your home while it’s sold…but you MUST get started as early as possible!

If you had a late start we can always try to get sales postponed…and many lenders will do what they can to make time for the sale to be completed…but why put yourself under that stress for no good reason?

I’m mad that the lender took advantage of me…let them Foreclose!

It’s easy to see why most folks feel angry with a foreclosure situation…but VERY FEW owners are best served by allowing a foreclosure…your credit is damaged for a long time…making it hard to rent another home, buy a car, get a credit card…you name it!  Foreclosure can even prevent you from getting a good job…why take this chance when it’s possible to minimize the damage?

Call Me…You’ll get the straight truth…and honest representation