The negative effects of home foreclosure, and how to save yourself from the biggest loss : Cleveland Real Estate

By:




CJ Harrington
Keller Williams Realty
www.cjharrington.com
cjharrington.crs@gmail.com
440.336.0612

10-28-08



Home ownership is one of the biggest dreams most individuals hope to fulfill. Owning a home not only speaks highly of an individual's achievements in life, but is ultimately the place where one can come home to after a long day at work.

Sadly, there are no absolute guarantees in life and such circumstances as illness, losing one's job, divorce or other life changing events can severely impact the average home owner. These unfortunate events may hamper one's ability to meet their financial ability to pay bills, taxes or even their home mortgages. When the home mortgage is the case, a lending institution may choose to file a home foreclosure. What is even worse than simply losing their home, is the serious financial and emotional repercussions that may also be experienced. Let us explore these for a moment.

Firstly, the experience of home foreclosure often means losing not only appreciation, but the equity invested in one's home over the years, which may reflect the loss of thousands and thousands of dollars. Yes, this is horrible in and of itself, but still other hardships are yet to come, and they may be worse. For example, upon foreclosure the bank/lending institution will report a financial loss on their income statement, which will require the already financially distressed home owner to declare the same loss amount as an increase in taxable income. Subsequently, they will be pushed even further into debt. Next, is the destruction of the individual's credit report, which sends a strong implication to creditors that, the individual cannot satisfy the terms of offered credit? This means that all these newly acquired expenses will not likely be covered by credit, and as more and more bills ensue, the individual falls further and further behind. So, what can these poor individuals do now? For most this is when, declaring bankruptcy becomes reality. Yes, this does seem like the easy way out, but they will likely not be extended credit or loans again for up to 10 years. Yet, don't worry, there is another option. An option most individuals do not even know exists. Pre-Foreclosure.

So, what is pre-foreclosure? Pre-Foreclosure is when a seller is in financial distress, and the bank/lending institution approves a sale even though the property will sell for a price less than what is owed to the lender. What this means to these financially distressed individuals is that rather than accumulating excessive future bills and credit woes for possibly the next 10 years, they do have an option to start back at square one and hopefully get their life back on track. I assume this sounds great in comparison, but realize this does tack time (on average 4-5 months) and is not certain (is subject to bank approval). Yet, if done right can be the best option. So, how can an individual apply for a pre-foreclosure?

Firstly, the property and seller must be qualified as a pre-foreclosure candidate. This means the seller must file a recent financial statement , a hardship explanation letter (in writing), most recent checking and savings account information, and prove they are at least 30 days delinquent on mortgage and bill payment, and submit all necessary documentation to the bank/lending institution (may differ between banks/lenders). Okay, so the bank/lending institution accepts the individual, so what is next.

Well, now the individual must bring forth a signed and ratified listing agreement. Then, they must obtain a contract signed by both buyer and seller, which will be subject to bank approval. This approval is subject to a settlement statement of seller paid closing costs, proof of buyer's financing, title report, and BPOs (Bank Price Opinions) for each lien affixed to the property. Yes, this is not a short process, but is worth all the effort.

So, if foreclosure is possibly your reality, talk to you local Realtor, and ask them if pre-foreclosure is an option for you. This could save you money and hopefully save you from the long term financial distress faced when foreclosure is your option.



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