If one is facing foreclosure, what other options do they have?

Asked by Alison Hillman, San Francisco, CA Mon Apr 8, 2013

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Jeff and Kaye Piggot’s answer
Jeff and Kaye…, Agent, Colorado Springs, CO
Mon Apr 8, 2013
I'm not from your area but our area has many people that are too facing difficult financial situations. My first peice of advice would be to contact your current mortgage holder and see if they can do anything as far as a loan modification. This may require you to submit financial information to them to prove that your circumstances have changed to a status that makes it difficult for you to meet the current payments and if the interest rate and/or term were changed you would be able to make this lowered payment.

Another option may be for you to sell your home before it goes to foreclosure. If you would be selling it at a loss it may be a "short sale" meaning the lender is accepting less than what is owed on the balance of the mortgage.

Find a good local agent to discuss what your property is worth and then you can make a more informed decision. Most good agents will take the time to talk to you and assist if they can to give you advice whether it benefits them or not.

Good luck!
Jeff Piggot
1 vote
Sandra Lehto…, Agent, New Ipswich, NH
Mon Apr 8, 2013
Hi Alison,

Thank you for writing in. This is a great question. There are a few options available to the homeowner who is facing foreclosure. They are as follows:

For a temporary fix:
1. File Bankruptcy;

For a more permanent fix:
1. Contact your current lien holder to request a loan modification;
2. Contact your current lien holder to ask about a Deed in Lieu of Foreclosure;
3. Foreclosure.

I hope you find this information helpful.

Thank you,

1 vote
I'd also add that you can do a "Short Sale," meaning that your lender will agree to a sale of the home for less that the amount owed.
Flag Fri Apr 25, 2014
Maryann Salt, Agent, Walnut Creek, CA
Mon Apr 14, 2014
Hi Alison,

There's been many that have responded with various points for you. The point I will make is that the person that is loosing their home needs to take a serious look at why they got into that position. More likely than not, it's not a situation that will improve. The faster that person contacts their bank to work it out, the more options they will have, versus waiting.

If one is not currently delinquent on their home and has made the past six months of mortgage payments on time, there's the Home Affordable Refinance Program, intended for homeowners that owe more than the value of their home.

If the interest rate is high and they need a lower payment, it's best to consult with a mortgage consultant to see what's available.

If that person needs help, I can be reached at 925-349-2179.

All the Best!
0 votes
aftervince19…, , Greenville, NC
Sun Apr 13, 2014
Don't let a foreclosure stop you from buying a new home. See Comstock if you have a buyer in need. They have a flexible credit loan. This program assists homeowners who have recently been through a foreclosure, short sale or have recently emerged from bankruptcy.
0 votes
Roy Bush, Both Buyer And Seller, Phoenix, AZ
Sat Aug 3, 2013
CFS Mortgage, http://www.cfsflex.com, has a flexible loan program. They allow a mortgage after a foreclosure, short sale, or chapter 7 bankruptcy. There is only a six month waiting period. This is perfect for individuals looking to become homeowners again.
0 votes
Angela Helfr…, Agent, Bellevue, WA
Fri Aug 2, 2013
Hey Alison,

I am not in your local market, but I have a handout that I give to people in your situation that may help. I posted it in my blog so that you can have access to the alternatives to foreclosure & short sale. (link below)

The most important thing is to stay in communication with your bank.

Hope this helps. Angela-
0 votes
Rodolfo De H…, , Temecula, CA
Fri Aug 2, 2013
Several, you can offer to modity your loan. You can sue your lender to get them to settle, you can have an investor buy your home, you can lease with an option to sell your home and carry the financing for a new buyer etc.

Call if you need assistance. 714-240-0635 .

Rodolfo de Hoyos
Legal Assistant
0 votes
publicface, Home Buyer, Bakersfield, CA
Fri Apr 12, 2013
8. You can file bankruptcy. For some people this can be a decent option, but as with everything there are good points and bad points. If you decide to go this route, do your research first. Don't expect your lawyer to tell you everything you should know. Remember, that's how they make their living and some might try to convince you that it's your best option when for most people it's probably not.

9. You can remain on the loan while still selling the property. This is a tried & true method of selling your house. If you work with someone that's honest and knows how to do this, this is almost always your best option as you don't necessarily need to discount the price, you don't have to lose your existing equity if you have any, and it can actually help improve your credit while providing you with tax benefits. The ignorant will try to tell you this is a bad idea – and will probably come out of the woodwork flashing their licenses and their “years of experience” when in fact what they're really telling you is they don't understand how it works. It is in fact true you could get burned, so you need to know the right information to protect yourself from that happening. Find someone that has experience doing it or there can be risk – such as the buyer failing to make the payments for you as promised and then you could end up in foreclosure and your credit ruined...

10. If you own your property free & clear (or nearly so), you can also “be the bank”, whereby the buyer makes payments to you. You might consider doing this if you have problems such as code violations, IRS or mechanics liens, unpermitted additions, inability to pay for repairs or any other problem that a typical bank financed buyer may not be able to handle. You don't even have to have any problems to sell it this way, for example you may just be tired of dealing with renters, or picky stuck-up buyers that DO qualify for bank financing and consider themselves to be in the catbird seat (which they are). You can sell it this way for any reason, or no reason at all – it's up to you. Maybe you just want a good investment – after all, what will you do with your money if you sell the house for a lump sum to a traditional buyer other than give half to the government? Put it in a savings account for 0.5% interest or a 1% CD? Risk losing it all in the stock market? Why not leave the money in the house, an investment you know inside & out?

11. Finally – again for someone that owns their house free & clear and still has good credit - consider taking out an 80% loan and like number 9 above, let the buyer assist in making your payments, insurance, taxes, repairs, maintenance and other normal expenses. Loans are currently still tax free.

12. This list may not be complete. There may be other options available to you, these are just the ones I know about.

Please note, not everyone will have all of these options open to them for various reasons. This is not meant to be construed as advice but merely information meant to be educational in nature. Seek professional help from a knowledgeable source. Also note that just because someone has a license doesn't mean they know anything or that they're being honest with you. Remember, if they stand to make money from the transaction they have a vested interest in convincing you to do it “their way” since that's the business they're in. Be leery of those that try to steer you towards any one particular option especially when they don't tell you all of your available options. Do your own research and determine the truth and best course of action for you and your specific situation. I am a private investor and I buy properties both with and without problems. I do not have a license of any kind.
0 votes
publicface, Home Buyer, Bakersfield, CA
Fri Apr 12, 2013
1. You can call your bank or lender and ask them to reinstate the loan. You may be allowed to reinstate or make the loan current by paying a lump sum or making scheduled payments to your lender over a given amount of time. A decent option if you have the ability to pay.

2. Modify your loan. Similar to number 1 above, but the lender agrees to change various aspects of your loan which may or may not include changes to the balance, interest rate, term and payment.

3. You can refinance your home. If you're upside down (also known as underwater and/or over-encumbered), this may prove difficult if not impossible.

4. You can list your home with a realtor. If you have equity in the property this can be a reasonable option. However, if you have very little equity, it is very hard to sell homes with real estate agents. The reason is that you have to pay a realtor commission if they list your house. Then they increase the purchase price of the home to compensate for the commission and now it becomes practically impossible to sell your house when it's at or over market value in such a short time. Plus, buyers cannot qualify for loans if the home is selling for more than what it's worth.

5. You can give the property back to the lender. If there are no other liens on the title, the lender may agree to take the property back. This process of transferring ownership from you to the lender under these circumstances is called a Deed in Lieu of Foreclosure also sometimes called “cash for keys”. You just walk away. A deed in lieu of foreclosure does not protect your credit, nor will it cut off the rights of junior lien holders. In other words, the lender would take the property back subject to the junior lien holders.

6. You can sell the house yourself. All you need to do is put a FOR SALE sign in your front yard and wait and hope. You may need to offer a discount to sell it more quickly – or at all, depending on your market.

7. Another way to sell your house is to an investor that will negotiate with your lender to accept a discount on your loan. This is called a short sale. This lets you avoid the foreclosure auction. Some investors will help you move and get you into a place that will fit your needs. You generally end up with no cash when all is said & done.

(continued next post due to lack of space)
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