Is a Pre-foreclosure Sale A Good Option for you? Life can throw some curve-balls our way. If your financial situation isn’t looking good and you haven’t been able to meet your mortgage repayments, you’re in danger of foreclosure.
Fortunately, though, there is a grace period between the time the public default notice is filed and your home is foreclosed. During this pre-foreclosure period, you have a chance to sell your property and look for the best possible outcome in what is a very difficult situation.
What is a pre-foreclosure sale?
A pre-foreclosure sale may allow you to avoid foreclosure by selling your home for an amount that can be used to satisfy your debt. In Colorado, the amount of time before the property can be sold at auction is 110-125 days after the notice of sale is sent to you.
Benefits of a pre-foreclosure sale
The primary benefits of a pre-foreclosure sale are:
- getting the equity out of your home, and
- avoiding foreclosure and the major impact that it can have on your credit score.
Your credit score is important to qualify for credit in the future, particularly being able to apply for a loan when you are again in a financial position to think about home ownership.
Other possible downsides to foreclosure
Once foreclosure has occurred, your mortgage lender will probably try to sell your property for whatever it can get. If the sale price is less than the amount that you owe, you could be pursued by your lender or HUD for a deficiency judgment, which could lead to your being responsible for the unpaid portion of the debt. And then, there could be tax consequences, as well.
If a sale is not what you want!
During this period, you still have an opportunity to pay off the default. Here are some options to consider:
- Negotiating with your lender for a repayment plan based on your financial situation
- Refinancing the debt or extending the term of your mortgage
- Working with your lender to obtain a loan modification.
- Discuss these options, and the pre-foreclosure sale, with your lender. You may have more options than you realize.
As real estate brokers licensed in the state of Colorado, we do not provide legal advice or tax counsel. Please consult legal and tax or other counsel from the appropriate professionals.