Can I Sell My Home If It’s In Foreclosure in New York?

Homeowners end up in foreclosure for a number of reasons. From the time someone first falls behind on their mortgage and is unable to catch up on multiple payments, there is a 90 day notice that is sent out to remedy the situation with the mortgage servicer. If they are unable to catch up on their payments, and are denied a loan modification or restructuring of their debt through filing a Chapter 13 bankruptcy, their only option at that point would be to sell the property.

Other reasons for being in foreclosure can be from having unpaid property taxes that turn into liens and get sold off to the county or other tax lien sales. Usually, the homeowner is able to redeem their property as long as they have the money to repay the taxes. If they do not, they can have another buyer take over the liens or sell them the property for a quick cash sale and have them recover the property after it has already been foreclosed on.

Once the Lis Pendens is filed on the property, it then becomes public knowledge that the property is in foreclosure. At this point, the homeowner starts to become bombarded by realtors, real estate investors, foreclosure defense attorneys, bankruptcy attorneys, and random people all trying to claim they can help the homeowner out of foreclosure. It is hard to decipher who is trustworthy and who is just looking out for their own interest. There are many people who scam homeowners that are in foreclosure, and once they sign something with someone, it is usually very difficult to get out of it.

In many cases in New York, because of high property taxes and sales prices, many homeowners end up “underwater,” owing more than their property is worth. Their only option at this point is to do a short sale or a short pay. A short sale specialist or a foreclosure defense attorney are usually able to help the homeowner by negotiating a short sale or short pay with the mortgage servicing company on behalf of the homeowner or the estate if the owner has died.

No one wants to receive a notice of foreclosure and yet, in a nationwide study, nearly 1 million Americans were afraid of losing their homes (U.S. Census Bureau Household Pulse Survey, fielded from July 27 to Aug. 8, 2022). And foreclosure can occur from a number of reasons, including:

• Job loss and loss of income
• Divorce or death of a spouse or partner
• Reverse mortgage debt
• Mounting debt, including medical and credit cards
• Moving without being able to sell the home
• Natural disaster
• Being behind on mortgage payments

Homeowners Resource Group, Inc. is a local company operating in New York that has built their business by helping homeowners with their distressed houses and properties. They are able to help homeowners avoid foreclosure and walk away from the property with money in most cases.

What is Foreclosure?

In New York, there are multiple stages to the foreclosure from the time the first summons and complaint is served upon the homeowner, tenants or other family members. This is usually a scary process since the process server will personally serve the defendant of the foreclosure. If they cannot reach them in person, they usually serve it upon another family member or household member that can relay the message to the actual borrower of the mortgage. If it is an estate, and the homeowner has died, the plaintiff’s attorney (the bank’s attorney), will locate the next of kin of the borrower. They do this so that they can have the legal right to foreclose on the estate. Usually, the family members do not have any liability financially or otherwise, and try to avoid having to do anything with the property because they feel they do not own it and do not want to be bothered with it. We usually get a lot of people in these situations and once we provide them with the options, we are usually told that it “sounds too good to be true.” But it is true.

How Long Do You Have To Get Out of Your House After Foreclosure?

Because a mortgage is a legal agreement for the signed note between the borrower and the lender, once they have defaulted on the loan, the lender can auction off the property to cover any outstanding debts, leaving the owner homeless and with terrible credit. A foreclosure can remain on a borrower’s credit for 7 years after the house has sold at auction. If they remedy the loan by doing a short pay or short sale and settle the debt for less, it is off the credit in 2 years or less. After the house is sold at auction, the lender or buyer who won the house at auction will either offer the owner cash for keys to leave, or will be evicted which takes a few months.

The Different Types of Foreclosure

There are two different types of foreclosure you may experience:  nonjudicial foreclosure or judicial foreclosure. New York is a judicial state and has to go through all the motions and stages of foreclosure in order for the Lis Pendens that was filed on the property to award the lender the property back at auction.

What Is Non-Judicial Foreclosure? 

A non-judicial foreclosure is the fastest and cheapest way for a lender to foreclose on your New York property. It does not require taking you, the homeowner, to court and can be completed according to state statutes. In the case of non-judicial foreclosure, your lender repossesses your home to sell it and recover whatever debt is owed using what’s called a “power-of-sale” clause in the deed of trust. Not every state allows for this option but, if yours does, the lender will generally choose it to avoid any court costs.

What Is Judicial Foreclosure?

New York is a state that requires judicial foreclosure. Your lender must file a lawsuit, a Lis Pendens, asking the court to issue an order to allow for the sale of the home. The lender must provide you with this letter, it is called an acceleration letter or a 90 day notice. Whether you agree or not, you must respond to the letter or the lender will automatically win the case and be allowed to put your home up for a foreclosure sale. This can still take a few years in New York. When the house is sold, you are still required to pay the difference between what you still owe on the mortgage and the amount the house sold for. This is called capital gains tax. In most cases that homeowners do a short sale, they usually are not required to pay capital gains because they are deemed insolvent.

Auctions are not like regular home sales and generally the house is not sold for market value. This means that even if your house is in great shape and worth a lot more than what is left on your mortgage, you may still find yourself owing tens of thousands (if not hundreds of thousands) of dollars for a house you no longer own! This is called a deficiency judgment. It’s an expensive and long process for lenders to take to try and recoup their debt, which is why most prefer a non-judicial foreclosure.

How to Sell Your House Before Foreclosure in New York

Let’s break down a few ways you can sell your house, depending on your time frame and situation:

Hire A Real Estate Agent

The first step most Americans think of when selling a house or property is to reach out to a local real estate agent. But there are pros and cons to this option when you are in a difficult situation such as foreclosure. Sure, a good real estate agent can list your property on the MLS and help you get it ready for open houses and daily showings, but they do all of this work so that at the end of the closing process a large chunk of your money from the sale of your house goes to them in the form of the agent’s commission. When you’re already suffering from a mountain of debt and need every penny to pay back your lender, a commission of 3% to 6% of your final sale price may be too hefty an amount to give up.

Plus, there’s the additional fear of not knowing when your house will actually close. Realtors may promise a lot, but at the end of the day you’ll still need to find the right buyer and wait 30+ days for a traditional close. For some homeowners who are facing auction and eviction, even waiting one month might be too long.

Short Sale

If you owe more on your house than it’s worth, your realtor may require what is called a short sale. A short sale is necessary when you owe more on your house than the property is currently worth. For example:  if you owe $200,000 on your house but in the current market it’s only worth $150,000, you must deal with a short sale. Though it may seem like a good option, it won’t be fast or easy.

To start off, you’ll first need to get your lender’s approval. To qualify for a short sale, you must prove financial hardship using documentation such as W-2s, medical bills, etc. For a situation such as loss of income, the lender will require that you prove that the loss of income is long-term and unlikely to turn around in your favor. If the lender approves the short sale, you will need to find a real estate agent and attorney that specialize in short sales, and they will still charge you the same amount as they would if you were selling your house with a traditional home sale.

If your foreclosure hasn’t dragged on for too long and you’ve maintained contact with your lender, it’s likely that they will approve the short sale. This allows them to avoid the time and expense of trying to foreclose on your property, while still recouping some of the loss from the missed mortgage payments. But for the regular American homeowner, the short sale will follow them for the next 5 to 7 years. 

You may have sold the house and been able to pay off some of your debt, but the short sale can damage your credit the same as if you had declared bankruptcy. The credit unions include the delinquency on your mortgage(s) to your lenders and the short sale on their records, making it nearly impossible for previous homeowners to get a credit card, buy a car, or move into a new house or property for the same amount of time as a bankruptcy.

Sell Your House AS-IS to A Cash Buyer

If you’re under a strict time restraint to sell your house before a foreclosure progresses to auction and eviction, you do have options! You can try to sell your property with a real estate agent, work with your lender to complete a short sale, or – best of all – turn to a trusted and reliable cash investor to help you with your situation.

Some of the benefits of selling to a direct cash investor include:

• A quick and pain-free closing process.
• Avoid paying any commissions or fees.
• You won’t have to worry about marketing your house and waiting for a buyer.
• No need to clean-up or complete any repairs!

When you sell your home as-is to a direct cash buyer, you not only can avoid losing your home to an auction, but you also may be able to sell the property for enough money to get out of financial debt. Moving on with your life without the burden of a monthly mortgage payment and debt hanging over your head is one of the best gifts you can give yourself!

Can You Stop Foreclosure Once it Starts?

Pay Off Your Loan & Fees

You’ve found yourself in a difficult situation. Your debt is adding up while your finances remain the same. It’s time to get serious and look at ways to pay down your debt quickly. Do you have any items you can liquidate? Maybe you have friends or family that can gift you money or provide you with a loan until you get back on track. If you are serious about paying down your debt and stopping foreclosure, you may need a financial professional to help you restructure your budget. Use one of these solutions or combine them all to help climb that avalanche of debt and get back to living a life free of stress.

Declare Bankruptcy 

As a last resort, bankruptcy may help you stop the foreclosure of your home but it comes with a high cost. The bankruptcy process is complex and will require a lawyer that specializes in bankruptcy law. If the court approves your petition, you will be entered into a government-approved credit counseling program and the bankruptcy will be reported on your credit report for 7 years. A bankruptcy affects all areas of your life, including when you try to purchase a car, apply for a credit card or bank account, and can disqualify you from future rentals.

The Homeowner Affordability and Stability Plan (HASP) 

If your debt is higher than your income, you may be eligible for the Homeowner Affordability & Stability Plan (HASP). HASP is a loan modification program targeted at borrowers who are at risk of foreclosure due to insufficient income. This government program was designed to help homeowners in the United States restructure their monthly payments to fit a limited budget. Apply for the program here to see if you qualify.

Sell Your House Fast to a Cash Buyer 

Are you ready to sell your house but don’t have the time to wait 30+ days for a traditional close? Does a short sale seem like a fast way to ruin your credit? Prefer to pay off all your debt at once and get the bank off your back fast? A direct home buyer and cash investor might be exactly the solution you’ve been searching for! When you work with a trusted and reliable investor with a great reputation in your area, you’ll find a helpful company with cash on hand that is ready to purchase your home from your as-is. With a cash buyer, you can skip the lengthy process of foreclosure, eviction, and auction within a matter of days, and save your credit as well!

You may not get full market value for your house or property when you sell to a trusted cash investor, but the timeliness of a fast closing, and the lack of fees, required inspections, and commissions often balance this out at close. Best of all, because an investor can close fast, you can often close before the bank is able to auction off your property! This means you can sell the property for the amount that benefits you versus the pennies to the dollar price the bank will often try to sell your house for just to get it off the books.

We Buy Houses in Foreclosure & Pre-foreclosure – Get Your Offer Today!

Does the idea of finally walking away from a property without the storm cloud of foreclosure hanging over your head? Contact a real professional at Homeowners Resource Group, Inc. to find out more and get a fair cash offer for your property today.