No one ever expects to find themselves in the situation of having to foreclose on their home. Unfortunately, there are unforeseen circumstances can leave people with no other choice. If you are a real estate agent who has been asked to help someone through the foreclosure process, it is crucial to understand what you are getting yourself into. This article will outline the basics of foreclosure. It will also give you some tips for helping your clients through this difficult time.
What Is Foreclosure?
Foreclosure is the forced sale of a property, usually by a lender who has taken possession due to default on a mortgage payment. In practical terms, this means that unless the homeowner can work out another arrangement with the bank (such as a short sale), they will be evicted from their home, and the bank will resell it at auction to recoup its losses. There may also be court actions involved in relation to repossession and eviction. If this happens, you should seek legal advice about if such matters arise for your clients.
Why Do People Default On Their Mortgages?
Many reasons lead to foreclosure. A job loss or a medical issue typically leaves homeowners unable or unwilling to continue making mortgage payments. Your clients would likely work hard to locate alternative financing if they have previously defaulted on a home loan to avoid foreclosure.
What Does It Mean If My Client's Bank Account Has A Lien On It?
Banks often post "lis pendens" (notices of pending action) on public records before foreclosing. This means that legal action is about to be taken on the land. Also, these filings safeguard the bank's interest if someone buys the house at auction and tries to avoid paying the debt. Any real estate agent or realtor involved in selling a home with a lien should be aware that third parties may contact them. Contact your local county clerk's office for official documents filed against your customers' properties if in doubt.
How Does The Foreclosure Process Work?
When homeowners default on their mortgage payments, lenders often try to work out new repayment schedules with them before taking legal action. Banks frequently place liens on their homes and launch lawsuits if no deal is reached, forcing them into foreclosure. The length of this process depends on the state and whether the lender goes to court. Many lenders won't accept client payments after the foreclosure sale (although this may not always be the case).
Suppose you represent your clients well and help them understand and prepare for what will happen when they enter foreclosure. In that case, there's a good chance that foreclosure can be avoided altogether. However, if you fail to do your duty as an agent and help your client keep their house, you may face legal consequences as well as losing the property you helped them buy.
What Can I Do To Help My Clients Avoid Foreclosure?
You can help your clients avoid eviction and repossession while also protecting yourself from legal issues. Among these alternatives are:
- Working with the bank to obtain a new repayment arrangement before it's too late.
- Contacting other lenders which could finance your client's home if theirs is no longer available.
- Helping your clients to obtain financial counseling. This will help them learn how to better manage their money and prevent future problems.
- Guaranteeing that properties are occupied after contractors, or plumbers have worked on them. As a result, banks will not be able to leave vacant homes for weeks or months at a time.
Final Thoughts
The idea is to express any issues you may have early in your professional relationship with your clients. If you wait until the last minute and then surprise them with foreclosure, lawsuits, and other issues, you may severely harm your business. If you find yourself in such a situation while working with a client facing foreclosure, contact an expert attorney as soon as you receive the bank's first letter.
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