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Pre-Foreclosure Sale

Posted on: 09th Apr, 2004 01:24 am
Your mortgage lender may choose to foreclose your property when you fail to pay your monthly mortgage payments. This means that the lender or the mortgage company can take over your property. In such a case, you can request your lender to restructure your mortgage or modify the terms and conditions of the loan. For instance, he may lower the rate or extend the loan period in order to help you avoid foreclosure. You may also refinance your loan and create a new mortgage on the same property with favorable terms.

If no option works out, you can opt for a pre-foreclosure sale of your property. Through this process, your loan servicer or lender sells the property at fair market value and accepts the proceeds as the mortgage payment. The sale may not provide you with enough cash to pay down the loan, but it will save the lender from paying the costs of foreclosing and selling. This also helps to prevent any negative item being shown on your credit report. But there are certain criteria depending upon which you may qualify for a pre-foreclosure sale.

Some conditions under which you can sell off your property prior to a foreclosure are given below.
  • The appraised value of the property is minimum 70% of the amount you owe and the sales price is 95% of the appraised value.

  • You have been delinquent on your loan payments for at least 2 months prior to the closing date of the pre-foreclosure sale.

  • You can convince the lender or the servicer that you will be selling off the property within 3 to 5 months.
Related Article:
I am unclear as to is the amount between a short sale and the balance on the loan is forgiven, have heard both yes and no. If it is not forgiven it seems it would be in the best interest of the Seller to hold as close as possible to the amount set by the bank and do a Deed in Lieu if the property does not sell by short sale. Correct?

Thank you,
Posted on: 06th May, 2009 06:20 am
Hi Bob,

In a short sale, the lender has the right to demand the deficient amount. However, in some cases, the lender may forgive the deficient amount. If the lender forgives the deficient amount, it would definitely benefit the seller. However, the seller may have to pay taxes on that forgiven amount.

Posted on: 06th May, 2009 10:29 pm
Do we still need to pay the property tax for a foreclosed property?
Posted on: 22nd Aug, 2009 08:00 pm
the cost to repair my home out weighs the balance owed. what do i do, bankrupt only option?
Posted on: 05th Jul, 2010 12:02 am
Hi Guest,

If the property is already sold off at a foreclosure auction, then you will not be considered as the owner of the property. Thus, you won't be liable for the property taxes.

Hi e shoulder,

You can apply for a deed in lieu of foreclosure in order to sell off the property. You will not only be able to sell off the property but you won't be liable for the balance amount resulting from the sale.


Posted on: 06th Jul, 2010 03:06 am
I had a loss in my income and have been working with the bank trying to get a loan modification. I was just told that my housing ratio is 24%. and it should be at least 31%, How does that work????They told me that I do not qualify for the loan modification unless there is a change in my H/R. the next step they said was pay what I owe 14,500.00 plus late fees of $700.00 plus attorney fees. or short sale. What can I do, I am desperate, since my mortgage owed is 170.000. and the house is about 270,000.00. Tks
Posted on: 04th Jun, 2012 01:37 pm
It is important to meet all the required criteria to get qualified for loan modification. I will suggest you to contact your lender and apply for HAMP.
Posted on: 05th Jun, 2012 12:29 am
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