How to prevent foreclosure - Sell property to a relative

If your relatives are not able to loan you the money to prevent foreclosure, perhaps they may be willing to purchase your property instead.  You can simply agree on a price, quit claim your property to them, and bring the loan payments current.  However, I recommend you use an escrow company and purchase title insurance to make sure the transaction is performed correctly. This is a simple and quick way to prevent foreclosure in California.

If you have a choice, it may be better to sell your property to a parent or to a child, because this allows you to avoid a reassessment of property taxes by the County Assessor.  Otherwise, your property will be reassessed at its current market value, and this can result in a substantial increase in your property taxes based on the provisions in California Proposition 13.

Prevent foreclosure - don't pass on your negative equity

If you do not have any equity because you owe more than the property is worth, I do not recommend using your relative’s funds to bail out the bank’s problem.  If you were to instead perform a short sale, the bank would voluntarily be taking the loss because this alternative is better for the lender than foreclosing.  

Prevent foreclosure - the short sale option

If you cannot afford the house, you are better off selling it in nearly all situations.  This approach (short sale) is better because it:

1. Provides immediate financial relief.
2. Avoids the negative consequences of foreclosure.
3. Reduces the family’s cost of housing substantially in most cases.
4. Instead of being stressed-out by the unaffordable payments, your (limited) funds can be used for other important items that your family needs.
5. Allows you to restore your credit rating.
6. Allows you to purchase a home sooner under Fannie Mae/Freddie Mac guidelines.
7. Creates the opportunity for you to improve your financial net worth because you will soon be in a position to purchase a home at the current low prices.

Be aware that it will be extremely difficult to obtain the lender approval for a short sale to a relative. If you want to sell your property this way, you will need some specialized assistance.

Comments

[LR]

Hi Editor. If you have any additional information regarding obtaining specialized assistance to obtain lender approval for a short sale to a relative I would appreciate it if you contact me through this blog. thank you.

[Michael Hanks, CPA (Retired)]

Greeting LR,

We have boatloads of information for you to check out! For instance we have http://www.proper-t-solutions.com/videos/15-options-to-prevent-mortgage-foreclosure-california-9-sell.html that video. Or you can click on Foreclosure videos above and it should be the ninth video. I know It's a bit late in the game, but I hope this information may be useful to you. Best of luck in your quest for short sale knowledge.