Can You Sell Your House Before It's Foreclosed On?

 

If you are suffering from financial hardship and facing home foreclosure, you may be able to sell your house before it's foreclosed on in order to avoid having a foreclosure sale report on your credit report and walk away with some of the equity you have built up over the years.

Living in Orlando, you're probably already very much aware that the Orlando metro area is one of the fastest growing city's in America, causing home prices to skyrocket. This means that if you purchased your house more than a few years ago, you likely have a significant amount of equity in your home. With that increase also come the increase in property taxes which you are now responsible for based on your homes' tax assessed value with the county in which you live.

While most of the people I talk to suffering from financial distress are looking for ways to keep their primary residence if possible, many in fact would not mind selling the home if they are able to do so prior to a scheduled foreclosure sale. These consumers can use proceeds from the sale to pay down debts, use the equity as a nest egg or a down payment on a future less expensive home, perhaps in a lower cost of living area.

If you're considering selling your home and are under financial distress you should start planning your exit strategy as soon as possible to maximize the equity you are able to get out of your home. This is because once a minimum of 180 days go by of non-payment you could be facing a foreclosure sale, in which case you will lose significant equity to legal fees that you could have saved.

If you don't see your financial circumstances changing by the time you receive a notice of trustee sale, it may be time to list your property on the open market. So if you've waited until the last 30 days prior to a scheduled foreclosure sale and you already had a loan modification denied or a bankruptcy case dismissed (all these are alternatives to foreclosure), you will need to act fast as most purchase and sale real estate transactions take at least 30 days to close under normal circumstances. This is because the property must be ready to list and go through the escrow process of clearing any liens and getting payoff letters from lenders. 

In the days approaching the foreclosure sale date you will most likely receive a few cash offers to purchase your property. These offers will likely be from investors looking to either make a profit flipping your home or your ordinary buyer. A seller would profit the most from an ordinary buyer who wishes to live in the property. Unfortunately, a person looking to live in the property long term is likely going to use a form of financing, whereas investors make all-cash offers and are able to close on the property quickly. So the amount of profit you are able to realize from the sale of your home depends heavily on how much time you have left before the foreclosure action. In any case, understand that you may have to accept selling your home below market value. 

What Is The Foreclosure Process In Florida?

If you default on your mortgage payments for your home in Florida a judicial foreclosure begins. A judicial foreclosure is when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. You generally get 20 days to file an answer with the court. If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, which will allow them to hold a foreclosure sale. 

If you choose to defend the foreclosure lawsuit, the case will go through the litigation process. The lender might then ask the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because there's no dispute about the critical facts of the case. If the court grants summary judgment for the lender -- or you lose at trial -- the judge will enter a judgment and order your home sold at auction.

Publication of a Notice of Sale

The lender must publish a notice of the foreclosure sale in a newspaper once a week for two consecutive weeks, with the second publication at least five days before the sale. (Fla. Stat. Ann. 45.031).

The Foreclosure Sale

The foreclosure sale must take place 20 to 35 days after the judgment date unless the court order says otherwise. The sale is an auction, which is open to the public. At the sale, the lender usually makes a credit bid. With a credit bid, the lender bids the debt that the borrower owes. Basically, the lender gets a credit in this amount. The lender can bid up to the total amount owed, including fees and costs, or it may bid less. In some states, including Florida, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. If the lender is the highest bidder, the property becomes what's called "Real Estate Owned" (REO).

But if a third party bidder is the highest bidder and offers more than you owe, and the sale results in excess proceeds--that is, money over and above what's needed to pay off all the lens on your property--you're entitled to that surplus money.

Under Florida law, the court clerk must promptly file a certificate of sale after the foreclosure sale, which usually happens within a day of the sale. You then have ten days after the filing of the certificate of sale to file an objection to the sale. (The bid amount at the sale is presumed to be sufficient consideration for the sale.) After ten days, assuming no one objects, the clerk confirms the sale and issues a certificate of title to the purchaser. 

Additionally, by allowing the home to foreclose you will have a foreclosure listed as a public record on your credit report, which will hurt your credit score and ability to obtain favorable credit. You may also have to wait several years to get a new home loan post foreclosure sale.

Therefore, in order to extract the most equity out of a distressed property a consumer should list their property on the MLS  as soon as possible, rather than on the eve of a judicial sale date.

Alternatively, if the ability to purchase a home in the future is of primary importance, selling your home to an investor for below market value may make the most sense and provide the most convenience if you are willing to sacrifice some equity.

If you live in the state of Florida and are looking for a real estate professional to assist with your real estate transaction amid foreclosure, give Ella M Taylor a call at 407-476-0507 or use the Contact form.