The pre-foreclosure process in Texas includes the following steps:
- Notice of default
The lender sends a written notice to the borrower if they are at least 120 days behind on payments. This notice gives the borrower 20 days to pay the past due amount and late fees to avoid foreclosure. Some loans, like FHA, VA, and home equity loans, may have a 30-day period instead. - Reinstatement
The borrower can reinstate the loan by paying the past due amount within the specified time frame. The loan documents may provide additional time to reinstate the loan. - Notice of sale
The lender’s attorney or foreclosure trustee schedules a sale of the property and records a notice of trustee’s sale in the county where the property is located. This notice includes the time and location of the sale, as well as the minimum opening bid. - Foreclosure sale
The foreclosure sale is held at the county courthouse on the first Tuesday of each month. Anyone can bid on the property. - Property becomes REO
If the property is not sold at auction, it becomes REO (Real Estate Owned) and is listed for sale by a licensed real estate agent.
Borrowers can also consider a deed-in-lieu, which is when the borrower voluntarily transfers the title of the property to the lender in exchange for cancellation of the mortgage debt. This can help borrowers avoid a foreclosure on their credit report, but it can still negatively impact their credit score.
In Texas, a homeowner facing foreclosure can use an investor to potentially stop the process by selling their house directly to them, essentially doing a “short sale” where the investor buys the property for less than the outstanding mortgage amount, allowing the homeowner to pay off the debt and avoid a foreclosure auction; this is often considered one of the best ways to prevent foreclosure while still giving up the home.
Key points about using an investor to stop foreclosure in Texas:
- Short sale:
The most common method is a short sale, where the investor purchases the property for less than the mortgage balance, allowing the lender to accept the sale and potentially release the homeowner from further debt. - Deed in lieu of foreclosure:
Another option is a “deed in lieu,” where the homeowner voluntarily transfers the property title to the lender in exchange for stopping the foreclosure process, which can still impact credit but may be better than a full foreclosure. - Benefits for the homeowner:
- Avoids the negative impact of a foreclosure on their credit score.
- May be able to access some funds from the sale even if it is less than the mortgage amount.
- Can potentially avoid the stress of a foreclosure auction.
- Important considerations:
- Negotiation with lender: The homeowner will need to negotiate with their lender to get approval for a short sale or deed in lieu, which may require providing documentation of financial hardship.
- Investor qualifications: Finding a reputable investor with experience in short sales is crucial.
- Legal advice: Consulting with a real estate attorney is vital to understand the legal implications and ensure all steps are taken correctly.
A few words of advice:
- Don’t stay in a house that’s too expensive for you.
- If you’re facing foreclosure, be wary of predatory loan modifications that sound like the perfect solution. If it’s too good to be true, it’s not.
- Never take bankruptcy advice from someone who isn’t a lawyer.
- If you’re underwater on a mortgage, take this opportunity to work with someone like Ohana Legacy Properties so you can downsize and bring your financial house back in order.
- If your home investor is honest, like us, they will tell you to look into every option to stop foreclosure at the last minute, including refinancing, loan modification, payment plans or other deals.
- Before contacting a professional home buyer, research the company’s reputation. Interview the investor. Get answers to every question on your mind before accepting the offer. Good and honest home investors will happily answer your questions.
We want to help, but we can’t do that until you call. No problem is too big, we’ve seen it all.
Hope you found this helpful.
And if you want or need to sell your house and not mess with the clutter or repairs, Ohana Legacy Properties is here to help. Set up a time to talk to us. You’ll be glad you did. 832-402-6181