Can I Sell My Home in Los Angeles If It’s In Foreclosure?
Foreclosure occurs when a homeowner is unable to make their mortgage payments on time and ultimately, has no way to catch up on the already missed payments. Because a mortgage is a legal agreement between you (the property owner) and your lender, once you’ve defaulted on the loan, the lender can auction off the property to cover any outstanding debts, leaving you homeless and with terrible credit. With a major negative mark on your credit history, it becomes more difficult to rent or buy a house for many years.
No one wants to receive a notice of foreclosure and yet, in a nationwide study, nearly 1 million Americans were afraid of losing their homes (U.S. Census Bureau Household Pulse Survey, fielded from July 27 to Aug. 8, 2022). And foreclosure can occur from a number of reasons, including:
- Job loss and loss of income
- Divorce or death of a spouse or partner
- Mounting debt, including medical and credit cards
- Moving without being able to sell the home
- Natural disaster, resulting in expensive damages
Fair Sale Homes is a local company that has built their business by buying distressed houses and unwanted properties in the Los Angeles county area for cash. We help homeowners by providing competitive cash offers without the hassle of dealing with real estate agents, title companies, traditional bank financing, and more!
Read More Posts Related To Foreclosure
- Avoiding Foreclosure on Your House in Los Angeles
- How to Stop Foreclosure on My Home in Los Angeles
- Surprising Reasons For Failed Home Sales in California
- 3 Popular Ways To Sell Your Unwanted Property in Los Angeles
- 5 Tips For Selling An Old House in Los Angeles
What is Foreclosure?
Let’s say you or your spouse recently lost your job. In an expensive place to live like Los Angeles, CA, this is a very common situation. The fact is you still have the same bills to pay, but unfortunately, you don’t have enough money to cover your expenses on a monthly basic, including your monthly mortgage payment. What happens next? Over multiple months, you miss mortgage payments (also know as “defaulting on your mortgage”) and receive a few notices from your lender. Even if you find another job, the amount of mortgage debt you’ve accrued during that time might be too large for you to pay off in a reasonable amount of time, in order to catch up on your late mortgage debt. When this happens, the bank starts the process of foreclosure.
For further clarity, a home can be foreclosed on for many kinds of debts, not just a mortgage. For example, Home Owner’s Association (HOA) can foreclose in some cases for unpaid dues and assessments. Or, if there’s a final court order (a judgment) that says you the homeowner owes money to a person or company, that person or company may be able to foreclose to collect the money they’re owed.
How Long Do You Have To Get Out of Your House in Los Angeles After Foreclosure?
The steps for foreclosure in most states are missed payments, public notice, foreclosure, auction, and eviction, but the amount of time for each step varies based on state. You could have anywhere from 120 days to nine months before the bank can foreclose using either a judicial or non-judicial foreclosure. During this time, your lender will reach out to you by phone, mail, and email to let you know about the process.
The Different Types of Foreclosure
There are two different types of foreclosure you may experience: nonjudicial foreclosure or judicial foreclosure.
What Is Non-Judicial Foreclosure?
In states such as California, a non-judicial foreclosure is the fastest and cheapest way for a lender to foreclose on your property. It does not require taking you, the homeowner, to court and can be completed according to state statutes. In the case of non-judicial foreclosure, your lender repossesses your home to sell it and recover whatever debt is owed using what’s called a “power-of-sale” clause in the deed of trust. Not every state allows for this option but, if yours does, the lender will generally choose it to avoid any court costs.
What Is Judicial Foreclosure?
In states such as that require judicial foreclosure, your lender must file a lawsuit asking the court to issue an order to allow for the sale of the home. The lender must provide you with this letter. Whether you agree or not, you must respond to the letter or the lender will automatically win the case and be allowed to put your home up for a foreclosure sale. When the house is sold, you are still required to pay the difference between what you still owe on the mortgage and the amount the house sold for.
Auctions are not like regular home sales and generally the house is not sold for market value. This means that even if your house is in great shape and worth a lot more than what is left on your mortgage, you may still find yourself owing tens of thousands (if not hundreds of thousands) of dollars for a house you no longer own! This is called a deficiency judgment. It’s an expensive and long process for lenders to take to try and recoup their debt, which is why most prefer a non-judicial foreclosure.
How to Sell House in Los Angeles Before Foreclosure
Let’s break down a few ways you can sell your house in California, depending on your time frame and situation:
Hire A Real Estate Agent
To no surpise, the first step most Americans think of when selling a house or property is to reach out to a local real estate agent. There are pros and cons to this option, especially when you are in a difficult situation such as foreclosure. A good real estate agent can list your property on the MLS and help you get it ready for open houses and daily showings, and in return, they are compensated at the end of the closing process a large chunk of your money from the sale of your house. Their compensation is known as an agent’s commission. In a unique situation like home foreclosure, when you’re already suffering from a mountain of debt and need every penny to pay back your lender, a commission of 4% to 6% of your final sale price may be too hefty an amount to give up. Do the math on how much money that is in an expensive city like Los Angeles to understand that’s a large chunk of money.
Plus, there’s the additional fear of not knowing when your house will actually close. Keep in mind that home foreclosure puts you in a time crunch. Once you receive that notice of default (NOD) from your lender, the clock is ticking so you need get the house sold without delay. Realtors may promise a lot, but at the end of the day you still need to find the right buyer and wait 30+ days for a traditional close. For some homeowners who are facing auction and eviction, even waiting one month might be too long.
Short Sale
If you owe more on your house in Los Angeles than it’s worth, your realtor may recommend what is called a short sale. A short sale is necessary when you owe more on your house than the property is currently worth. For example: if you owe $500,000 on your house but in the current market it’s only worth $450,000, you must deal with a short sale. Though it may seem like a good option, it won’t be fast or easy.
To start off, you’ll first need to get your lender’s approval. To qualify for a short sale, you must prove financial hardship using documentation such as W-2s, medical bills, etc. For a situation such as loss of income, the lender will require that you prove that the loss of income is long-term and unlikely to turn around in your favor. If the lender approves the short sale, you will need to find a real estate agent and attorney that specialize in short sales, and they will still charge you the same amount as they would if you were selling your house with a traditional home sale.
If your foreclosure in Los Angeles hasn’t dragged on for too long and you’ve exhibited good faith by maintaining contact with your lender, it’s likely that they will approve the short sale. The reason a lender would actually approve this is to allow them to avoid the time and expense of trying to foreclose on your property, while still recouping some of the loss from the missed mortgage payments. But for the regular American homeowner, you should fully be aware that the completed short sale has negative impacts that will follow you for the next 5 to 7 years.
These financial repurcussions that will follow homeowners for some time. You may have sold the house and been able to pay off some of your debt, but the short sale can damage your credit the same as if you had declared bankruptcy. The credit unions include the delinquency on your mortgage(s) to your lenders and the short sale on their records, making it nearly impossible for previous homeowners to get a credit card, buy a car, or move into a new house or property for the same amount of time as a bankruptcy.
Sell Your House AS-IS to A Cash Buyer
If you’re under a strict time constraint to sell your house Los Angeles before a foreclosure progresses to auction and eviction, you do have options! You can try to sell your property by working with a real estate agent, complete a short sale by working with you lender, or – best of all – turn to a trusted and reliable local cash investor (sometimes called cash buyer) to help you with your unique situation.
Some of the benefits of selling to a direct cash investor include:
- A shorter timeframe to sell the house.
- A quick and pain-free closing process.
- Avoid paying any commissions or fees.
- You won’t have to worry about marketing your house and waiting for a buyer.
- No need to clean-up or complete any repairs
When you sell your home as-is to a direct cash buyer, you not only can avoid losing your home to an auction, but you also may be able to sell the property for enough money to get out of financial debt. Moving on with your life without the burden of a monthly mortgage payment and debt hanging over your head is one of the best gifts you can give yourself!
Can You Stop Foreclosure in Los Angeles Once it Starts?
- Pay Off Your Loan & Fees
You’ve found yourself in a difficult situation. Your debt is adding up while your finances remain the same. It’s time to get serious and look at ways to pay down your debt quickly. Consider your options to generate extra income in order to play catch up financially. Do you have any items or collectibles you can liquidate? Maybe you have generous friends or family that can gift you money or provide you with a personal loan until you get back on track. If you are serious about paying down your debt and stopping foreclosure, you may need a financial professional to help you restructure your budget. Use one of these solutions or combine them all to help climb that avalanche of debt and get back to living a life free of stress.
- Declare Bankruptcy
As a last resort, bankruptcy may help you stop the foreclosure of your home but it comes with a high cost. The bankruptcy process is complex and will require a lawyer that specializes in bankruptcy law. If the court approves your petition, you will be entered into a government-approved credit counseling program and the bankruptcy will be reported on your credit report for 7 years. A bankruptcy affects all areas of your life, including when you try to purchase a car, apply for a credit card or bank account, and can disqualify you from future rentals.
- The Homeowner Affordability and Stability Plan (HASP)
If your debt is higher than your income, you may be eligible for the Homeowner Affordability & Stability Plan (HASP). HASP is a loan modification program targeted at borrowers who are at risk of foreclosure due to insufficient income. This government program was designed to help homeowners in the United States restructure their monthly payments to fit a limited budget. Apply for the program here to see if you qualify.
- Sell Your House Fast to a Cash Buyer
Are you ready to sell your house in but don’t have the time to wait 30+ days for a traditional close? Does a short sale seem like a fast way to ruin your credit? Prefer to pay off all your debt at once and get the bank off your back fast? A direct home buyer and cash investor might be exactly the solution you’ve been searching for! When you work with a trusted and reliable investor with a great reputation in your Los Angeles area, you’ll find a helpful company with cash on hand that is ready to purchase your home from your as-is. With a cash buyer in Los Angeles, you can skip the lengthy process of foreclosure, eviction, and auction within a matter of days, and save your credit as well!
You will hear that you may not get full market value for your house or property when you sell to a trusted cash investor, but remember that you are about to lose your home in foreclosure. So the timeliness of a fast closing, and the lack of fees, required inspections, and commissions often balance this out at close. Most importantly, because a Los Angeles cash investor can close fast, you can often close before the bank is able to auction off your property! This means you can sell the property for the amount that benefits you versus the pennies to the dollar price the bank will often try to sell your house for just to get it off the books.
We Buy Houses in Foreclosure & Pre-foreclosure – Get Your Offer Today!
Does the idea of finally walking away from a property without the storm cloud of foreclosure hanging over your head sound right for you? Contact at Fair Sale Homes to get a fair cash offer for your property today.