Selling a Home in Foreclosure
The notice of an impending foreclosure can feel like a death sentence but you do have options. Selling your house is a great way to avoid foreclosure, and by doing so, you may even be able to walk away with some of the proceeds!
Here’s how you can sell your property during a foreclosure, preserving your credit, and even earning some additional cash along the way.
What is foreclosure?
Foreclosure is a legal process in which the holder of a lien, mortgage or promissory note against a property takes possession of a home due to missed payments or default.
In Florida, foreclosures are judicial foreclosures, in which a circuit or county judge must preside over the foreclosure proceedings, ultimately ruling on weather or not the loan is in default, if all required steps were properly taken by the foreclosing party, and if there are any other circumstances which might legally protect the borrower.
What is the process for Judicial Foreclosure in Florida?
The foreclosure process in Florida starts with a missed payment or outstanding lien. During this time, when the account is delinquent, but foreclosure hasn’t officially started, you are in pre-foreclosure. This is the easiest time in which to sell your home as no legal process has been initiated.
Next the lender or lienholder will send a “breach letter” or “default letter”. This letter alerts you that your account is now delinquent on payments and that the lender can accelerate the loan or foreclosure on the property, along with information on how to make the account current again.
Subject to 12 C.F.R. § 1024.41 a foreclosure proceeding can be initiated 120 days after missed mortgage payments and a delinquent account. After receipt of a breach letter, and after 120 days have passed, your lender or lienholder will file a lis pendens, or notice of lawsuit against the property. This is a document recorded in the public record of the county in which the home resides alerting the public that there is pending legal action regarding the subject property.
The lender will then file the lawsuit for a foreclosure action. Homeowners typically have 20 days in which to respond to or rebuke the claims made by the lender. If a response is provided, a hearing will be scheduled and held by a judge to determine the outcome of a foreclosure. If you choose not to respond a judge will typically enter a Default Judgment of Foreclosure, awarding the foreclosure to the lender.
When a response is provided, the lender will request a Summary Judgment of Foreclosure. A summary judgment awards the foreclosure to the lender because of a lack of valid defenses that can be provided by the defendant.
Once a judgment has been entered, the foreclosed home will be listed for sale via a foreclosure auction, and the public will be notified. A foreclosure sale will be scheduled for the auction, and a date will be set. The bidding will be based on the amount owed, and once the sale concludes you will have a limited time to contest the sale before possession is granted and an eviction can be performed.
How to sell a home in foreclosure
Selling during a foreclosure is a game of timing. The best way to ensure the highest likelihood of being able to sell is by starting early. The moment your home enters pre-foreclosure you should begin to think of how to get it ready to sell.
Your first step should be to hire a real estate agent. Then, working with your agent you should identify areas that will need to be repaired or updated. Next, clean the house and stage it for showings. Many foreclosure homes are for sale in Jacksonville, FL on the open market, so you’ll need to ensure yours stands out to find a buyer before the foreclosure auction takes place.
You’ll have until the day that the foreclosure auction sale is finalized and the certificate of title is issued to the buyer to finalize their purchase of your home.
Potential Complications when selling in foreclosure
The most common complications that can occur when selling a home in foreclosure include owing more than the home is worth, and running out of time, which we have discussed above.
If you owe more on your loan than the home is worth, you have negative equity in your home. With negative equity, you will need to pay the difference to your lender when you sell to satisfy the loan. If you are behind on payments, finding additional cash may be difficult. Your other option is a short sale, in which a specialist works directly with your lender to provide documentation regarding why and how your home has decreased in value in an effort to get them to agree to let you sell for less than your mortgage without covering the difference.
Other complications can include the need for costly repairs prior to selling, or buyers backing out at the last minute. Both of which can severely reduce your ability to sell in time.
One potential remedy to these complications is to sell for cash. A good cash home buyer will have licensed agents who can help you with a short sale, and won’t require any repairs prior to closing. Additionally, they are able to close much more quickly than traditional buyers, ensuring your sale finishes before the auction takes place.
The views expressed in this article represent the opinions of the author and are not intended to be relied upon as legal or real estate advice. Always consort with a real estate attorney or professional before making any decisions.