How to prevent foreclosure - Sell property through a realtor
Michael Hanks, CPA (Retired)To avoid foreclosure you may opt to sell your property. This is true if you are unable to work with the existing lender(s), to get a loan modification or agreement for a short sale. The biggest issue is the time required to sell at a fair market price, especially in a market where buyers are spoilt for choice. Given time, a realtor is often able to obtain a higher sales price compared to selling to a private investor, but this is not always the case with properties facing foreclosure.
The homeowner should not automatically assume he or she can get full market value by selling through a realtor, there are time constraints and the property may need repairs.
Prevent foreclosure through realtor sale - time constraints
Using a realtor may be viable if the property has already been prepared to sell (i.e., necessary repairs are made) the homeowner has enough time to complete the transaction before the auction date, and the property has equity:
- You should be prepared to list the property at a large discount to get an offer from a qualified buyer quickly. Time is not on your side when facing foreclosure.
- You should be prepared to accept significant discounts from the asking price to compensate for any deferred maintenance or other defects to the property.
- Assuming the homeowner receives and accepts an offer in a timely manner, you need to remember there are 30-45 days needed to close escrow. If the foreclosure process has commenced, there is very little time to close.
One additional suggestion - When listing the property, the homeowner should insist that the listing agreement allows the listing to be cancelled, without paying a commission, if the owner finds his or her own buyer.
Prevent foreclosure through sale to an investor
The homeowner may need to work with a private investor who can quickly close the transaction, or talk to a relative who may be able to purchase the property. Investors also have a much higher success rate with short sales than most real estate agents.
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