©jscreationzs - freedigitalphotos

©jscreationzs – freedigitalphotos

When homeowners are trying to save a house from sold at sheriff sale and eviction procedures, they almost always want to know what the best solutions are to avoid foreclosure. While there is no “best” solution, only ones that work and ones that do not, potentially bad decisions by borrowers, state foreclosure laws, and current economic conditions make a few common methods to save a home more problematic than others.

One solution that many homeowners consider when first facing a financial hardship is refinancing their mortgage at a lower interest rate. While this may be a possibility for borrowers with a still high credit score and some equity in the property, it may be difficult to qualify once mortgage payments have been missed. With property values in decline across the country, some owners may find themselves underwater, owing more to the bank than their home is worth.

Refinancing to stop foreclosure can be done through hard money lenders and specialized foreclosure lenders, but the terms and conditions can often be difficult on homeowners. Interest rates as high as 15% or more, and strict equity requirements put this type of bailout loan out of the reach of many homeowners. Too often, though, borrowers will attempt to qualify for a foreclosure loan with one mortgage broker after another, not realizing that the loan is being turned down by the same exact lenders each time.

Another problematic solution to save a house right now is selling on the open market through a real estate agent. In areas that have been hardest hit by foreclosures, property values have fallen sharply (sometimes by 40-50% from peak prices). This has put many homeowners, even those who had significant amounts of equity, underwater. Few buyers are willing to pay the inflated home prices of 2006, but few lenders are really willing to work with borrowers to complete short sales.

Finally, homeowners who have unsuccessfully tried refinancing or selling their home often just give up, lock the doors, and move out of the property. This is another solution that causes more problems than it solves, in some cases. The foreclosure process will continue, with the homeowners’ credit being ruined by missed mortgage payments. While banks rarely pursue deficiency judgments after a foreclosure, the possibility of one is often a huge concern for borrowers for years.

Walking away from a home in foreclosure also creates problems in the surrounding community, as the empty house becomes a target of squatters, vandals, or for being stripped of materials. Routine maintenance and upkeep on the property is not done when the bank owns the property after the sheriff sale, further deteriorating the quality of life in the neighborhood. On any block, it is usually easy to tell the foreclosed house — it will be the one with boards in the windows, an overgrown lawn, and a door hanging off its hinges.

In fact, homeowners would be better off staying in the house for as long as possible until they are threatened with eviction by the bank or the new owner, if for no other reason than the security they provide for the house. However, there are better solutions to foreclosure than these listed here — ones that have a much better chance of succeeding. While every option should be considered to save a house, homeowners should put their limited time and effort into methods with a higher rate of success, rather than these problematic ones.

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