Preforeclosure

Preforeclosure is the process of foreclosure in which default has officially taken place. A notice of default has typically been filed as the first step in preforeclosure. If the debt is not paid, then the process of foreclosure will begin. Preforeclosure is also known as Lis Pendens, or lawsuit pending in states that conduct judicial proceedings. Texas is a state that uses both non-judicial and judicial proceedings.

A Preforeclosure Sale Program will allow a mortgagor to sell his or her home and use the proceeds from the sale to satisfy the mortgage debt even though the profit may be less than the amount owed by the borrower. In a preforeclosure sale the house will have an "as is" appraisal and the value is at least seventy percent of the amount that you owe. The sales price is ninety-fiver percent of the appraised value. The loan must also be two months delinquent prior to the sale occurring. If you are able sell your home within three to five months, the additional benefit to a preforeclosure sale is the assistance that you will receive through seller-paid closing costs. A preforeclosure sale will help you to avoid foreclosure by selling the property for a lesser amount than necessary to pay off the mortgage loan.

Many individuals will negotiate a short sale with a lender. This requires the borrower finding an interested buyer and in many instances borrowers find buyers coming to them. In many instances, lenders are likely to accept less than the full amount due. Negotiating a short sale with a lender can be difficult. It is often difficult to find a bank officer that is authorized to accept a discount on the property. You are often required to locate a lender's "Loss Mitigation Department" or similar department.

For a lender, a short sale will save many of the costs associated with foreclosing on a house. There are often attorney's fees, eviction costs, delays incurred if a borrower is going through bankruptcy, property damage, costs associated resale and any other costs that may be associated with the foreclosure process. Essentially the lender is able to cut their losses quicker than if they went through the entire foreclosure process.

The borrower must also be able to show that they are broke and cannot afford to make the payments. The borrower will have to show no other source of income or assets that can be used to repay the loan. In many instances, the bank will seize personal property in order to cover the debt. The borrower will need to send a "hardship letter" that shows the financial situation of the borrower. The lender will often require that a real estate broker or appraiser to evaluate the property the property. This is often called the broker's price opinion or BPO. The new buyer of the property is also allowed to submit his or her own appraisal and sales information. They will typically point out as many negative aspects of the property as possible. They may also submit a contractor's bid for repair estimates on the home as well.