A smart home owner can use a slightly obscure fact to their advantage to try to prevent foreclosure by their bank. Did you know that it is less expensive for loan servicers to keep you in your home than actually go through with a foreclosure?
On average, it costs the lender between $60,000 and $80,000 to foreclose on a property. In the long term, it would cost less for them to work with the home owner to negotiate a solution to the problem than remove them from their property. Often, the debtor has to be the one to raise this issue to the mortgage company. It can be a very useful negotiating strategy.
Why does it cost so much to foreclose? To begin with, there are the expenses of going through the court process of eviction. The banks have to hire local law firms that specialize in evicting people. Then, there are charges associated with filing the paperwork and eviction proceedings.
If the home owners fight back, then the bank’s legal fees begin to increase faster and faster. Once a foreclosure or eviction hearing is final, then the mortgage company has to pay the costs of evicting borrowers if they refuse to leave the dwelling voluntarily. A lender with any intelligence be willing to negotiate with a home owner to avoid foreclosure.
After securing the property from the foreclosed home owner, the lender is then left to deal with the aftermath. Often, if a home owner doesn’t have the funds to keep up their mortgage payments, they also did not have the resources to maintain the property. And a number of foreclosure victims, in frustration over what was going on, do damage to the property before they are forced to leave. All of this now falls on the mortgage company to clean up.
Whether the property was destroyed due to neglect or revenge, the mortgage company will usually not do anything about it. This causes the value of the property to decline and the longer it is neglected, the further the value falls. In the end, the lender will accept far less for the property than what they would have if they had negotiated with the owners to prevent foreclosure before it began.
Even if the bank does nothing to keep up the property, they still have to deal with the other expenses in owning that home. Any property taxes that are due on the parcel have to be paid to the county. And, some level of home owner’s insurance will need to be purchased for the residence to protect the lender from covered damages to the house. Further, when they try to unload the property, the mortgage lender will need to use local real estate agents.
That means they will have to pay commission fees to them when the property is finally sold. It simply makes little financial sense for a mortgage lender to incur those expenses when it would be more efficient for them to negotiate with the current borrowers. This is just one piece of information that can help you to save your property from foreclosure.
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