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The Difference Between Pre-Foreclosure and Foreclosure for Homeowners in Los Angeles

The Difference Between Pre-Foreclosure and Foreclosure for Homeowners in Los Angeles

Foreclosure and preforeclosure are two terms that are commonly used in the real estate industry and usually occur when a homeowner unexpectedly finds themself in financial distress and missing multiple mortgage payments. While terms foreclosure and pre-foreclosure may sound similar, they have very different meanings and implications for both homeowners and potential buyers.

  • What is the definition of pre-foreclosure?
  • What is definition foreclosure?
  • What occurs in pre-foreclosure to result in foreclosure?
  • What is the credit score impact to your future as a result of pre-foreclosure or foreclosure?
  • What is the difference in buying a house in pre-foreclosure vs foreclosure?
  • What are your options if you are in financial distress and miss a mortgage payment?

What is Preforeclosure?

Preforeclosure is a period of time before foreclosure proceedings have begun. Preforeclosure is the first step in a foreclosure proceeding brought on because the homeowner has failed to make 3 – 6 months’ worth of payments. During preforeclosure, the homeowner has fallen behind on their mortgage payments and has received multiple notices from the mortgage lender. When a homeowner takes out a mortgage, they agree to make payments according to your contract. Depending on your contract, your lender may give you a short grace period after your monthly payment is due – usually 15 days – before you’ll be considered late and charged fees.

At this point, the lender has not yet initiated the foreclosure process. It’s very important that you respond and stay in regular contact with the lender during this period. They’ll do their best to work with , but they can’t if you don’t pick up the phone or answer emails.

Homeowners in preforeclosure typically have a few options to avoid foreclosure, including paying what’s owed, working with their lender to modify the mortgage to reduce their monthly payment, or settling the debt through a short sale or deed-in-lieu-of-foreclosure. Preforeclosure can give homeowners an opportunity to work with their lender to find a solution to their financial difficulties, such as a loan modification or a short sale.

What is Foreclosure?

No one ever wants to think about losing their home. Whether you’re seeking a foreclosure definition because you’re dealing with the process yourself, buying a foreclosed home or just looking to be prepared for anything, it’s important to understand what you might be dealing with and how you can protect your home if needed.

Foreclosure is a legal process that occurs when a homeowner is unable to make their mortgage payments. When a homeowner falls behind on their mortgage payments, the lender can initiate foreclosure proceedings, which can ultimately result in the loss of the home where the lender repossesses the home and attempts to sell the house. Foreclosure is a serious event that can have long-lasting consequences for homeowners, including damage to their credit score and difficulty obtaining future loans.

The Timeline

One of the main differences between foreclosure and preforeclosure in California is the timeline. Foreclosure is a lengthy legal process that can take months or even years to complete. During this time, the homeowner may have the opportunity to stay in the home and make arrangements to catch up on their mortgage payments. However, once the foreclosure process in California is complete, the homeowner will be forced to vacate the property.

Preforeclosure, on the other hand, is a much shorter period of time. Typically, preforeclosure lasts only a few months before the lender initiates foreclosure proceedings. During this time, the homeowner may have the opportunity to work with their lender to find a solution to their financial difficulties. However, if a solution is not found, the homeowner will still be at risk of losing their home.

Long Term Effects on Credit

Another key difference between foreclosure and preforeclosure is the impact on the homeowner’s credit score.

Preforeclosure may have less of an impact on the homeowner’s credit score. While falling behind on mortgage payments can still have a negative effect on credit, working with the lender to find a solution during preforeclosure can help mitigate some of the damage. The sooner a borrower communicates with their lender and jointly comes to a solution with the lender to get caught up with missed mortgage payments, the less severe of a situation the borrower stays in. Your credit score will be impacted based on how you dealt with your pre-foreclosure situation.

Foreclosure, on the other hand, is a serious event that can have a significant negative impact on a homeowner’s credit score. A poor credit score can make it difficult to obtain future loans or credit, and can also result in higher interest rates and fees. Your credit score is an important part of you re-building your future, so keep that in mind and keep in close contact with your lender if you are at risk of missing a payment or even after you have missed a mortgage payment. A couple of missed payments that get caught up quickly impacts you much less than having your home foreclosed and ultimately, repossessed by the lender.

Buying Properties in Foreclosure or Preforeclosure

For potential buyers, there are also important differences between foreclosure and preforeclosure. Foreclosed properties are typically sold at auction, and buyers must be prepared to pay cash or obtain financing quickly in order to purchase the property. Additionally, buyers may need to deal with issues such as liens, unpaid taxes, or evictions. For buyers who can pay cash and have experience dealing with imperfect properties and problem tenants, making the quick decision at auction to buy a house in foreclosure can come with a tremendous about of built in value. Making the decision to plunk down the cash and accept the home’s known and unknown issues is actually easier than buying in the nebulous stage os pre-foreclosure.

Preforeclosed properties, on the other hand, may be available for sale through a short sale. During a short sale, the homeowner sells the property for less than the amount owed on the mortgage, and the lender agrees to accept the proceeds as payment in full. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt. As a buyer,it’s a bit of a waiting game in terms of getting agreement from the home owner to sell and walk away with no equity (and possibly carry some debt) and also, getting agreement from the lender to sell the house for a less than the amount of debt. Short sales can be a good option for buyers who are looking for a deal, but as described, they can also be time-consuming and unpredictable.

Foreclosure and preforeclosure are two distinct terms that have different implications for homeowners and potential buyers. Foreclosure is a legal process that can result in the loss of a home and can have long-lasting negative effects on a homeowner’s credit score. Preforeclosure, on the other hand, is a period of time before foreclosure proceedings have begun that can give homeowners an opportunity to work with their lender to find a solution to their financial difficulties. For potential buyers, foreclosed properties are typically sold at auction, while preforeclosed properties may be available for sale through a short sale. Understanding the differences between foreclosure and preforeclosure can help homeowners and buyers make informed decisions about their real estate options.

What Are My Options?

To stop your house in Los Angeles from going into foreclosure, you’ll either need to get rid of the property fast or find a way to quickly increase your income so you can better afford the mortgage. Frankly, owning your home in shouldn’t feel like a struggle each month. You should be able to feel confident in the ownership of your home in sunny CA. If your mortgage has become too much to handle and you are in financial distress, it may be time for you to find an alternate solution.

How Fair Sale Homes Can Help With Foreclosure

The bottom line is the both financial distress and the resulting risk of foreclosure is a very tough time for you requiring tough decisions. If you are struggling with your monthly mortgage, Fair Sale Homes is able to buy your property outright. We will make you an offer and close on the property when you are ready. At Fair Sale Homes, we help local homeowners here in California get out of their difficult situations once and for all. If you are struggling with a house you can no longer afford, reach out to our team today to learn more about the options available to you. We are happy to answer any questions you have about the process. (626) 863-7006

WE BUY HOMES across cities Southern California. A sample of cities where we buy homes for cash: East Los Angeles, Lincoln Heights, Silver Lake, Atwater Village, Van Nuys, Northridge, Pacoima, Panorama City, Harbor City, and Wilmington. Also, we buy apartments in Los Angeles, CA. Whether you are experiencing home foreclosure, code violation, failed property sale, or simply have an unwanted property, we will work with you to find a solution.

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