To Foreclose or Not To Foreclose?
What? Who is asking this question? Do lenders ask themselves this question? You bet they do!
Most lenders look at all the scenarios when one of their loans is in default. If it cost the lender $50 to $60 thousand dollars to foreclose on a home versus half that or less to do a deed in lieu of foreclosure, or even a short sale, most will opt for the latter two. There are even lenders who have so many homes in default that they will not even address them in the normal 60 to 120 days. I have seen lenders take up to a year to actually start the process of foreclosure. There can be many reasons for this and each case is different so I wouldn’t count on the fact that YOUR lender would take this long to foreclose on your property should you be in default.
But let’s turn this question around: To foreclose or not to foreclose? That is the question that HOMEOWNERS themselves should be asking, and in turn, they should be doing their diligence to find the answer. There may be several benefits to let your home go into foreclosure and their maybe several consequences to the homeowner that makes a foreclosure not a viable option. What effect will a foreclosure have on your taxes? What effect will a foreclosure have on your credit? What effect will a foreclosure have regarding your solvency? All of these things should be taken into account before just LETTING a foreclosure happen to you. Furthermore, YOU may decide that you are going to go down this path, even though you can afford to make the payment, but since there is SO MUCH VALUE GONE, you are going to stop stepping over dollars to pick up pennies. I would refer to this as a “strategic foreclosure”.
Is it wrong to think this line of thinking? Absolutely not! Unfortunately, if you don’t think along these lines, no one else will be thinking about what is best for YOU! Thinking this way puts you in a better position to at least help to affect the outcome you are going to experience. Fear is based on the unknown. If you start down the path of this process, at least doing your due diligence, much of the fear will subside.
If you can save your home, then work along those lines to save your home. DON’T let anyone tell you they can guarantee they will save your home because each case is different. I am not saying there are not professionals or groups out there that cannot effect a change, but if you pin all your hope on that, you may be in for a let down.
If you are considering a strategic foreclosure, or a strategic short sale, I would strongly advise that you speak with an attorney for the legal options available to you, AND, and accountant for the financial options available to you BEFORE making that decision. You will at least be better informed about the direction to choose before someone else’s direction is imposed upon you. Then, you will NOT have many choices left.