How Companies That Buy Homes for Cash Help When Facing Foreclosure

Published October 31, 2022. Updated October 23, 2023. 

When going through difficult times, it's always tough when homeowners are facing foreclosure. Unfortunately, downward pressure, cost of living, and inflation increase may see more and more homeowners dealing with this financial threat and other financial emergencies. 

If you're worried about the banks stepping in and want to get ahead of the issue, then there are a couple of strategies at your disposal. 

This blog looks at two strategies you can implement to avoid foreclosure and the knock-on effects of this situation. Plus, we tackle the best strategy if you need to "sell house fast Twin Cities," fairly and locally.

What Is Foreclosure?

A foreclosure is a legal process in which the mortgage issuing bank (mortgagee or lender) repossesses a home due to the owner (mortgagor or borrower) defaulting on mortgage repayments. 

The bank will foreclose the house so they can list it for sale to recover the balance from the loan. The bank's interest is not necessarily to earn any profit but to recoup their losses. Therefore, they will likely sell the house at a reasonable price after repossession. 

Why Do Homes Go Into Foreclosure?

Many unforeseen circumstances can lead to foreclosure, which can happen to anyone.

When people buy homes, banks scrutinize their financial capabilities for mortgage payments. About 70% of mortgages span 30 years, but life's twists can alter financial stability. If at any point you're unable to pay monthly mortgage payments, your home can go into foreclosure.

COVID-19 taught many homeowners this lesson. However, even without a pandemic, foreclosure is a reality for many dealing with:

• Significant debt, including credit card debt

• Natural disaster

• Job loss

• A reduction in income

• Moving without being able to sell the home

• A medical emergency or long-term illness

• Divorce

• The death of a spouse or partner who helped cover mortgage payments and expenses

• A sudden and significant expense

As you can see, things can change for anyone financially, leading to the loss of a home through foreclosure.

What Are the Impacts of Foreclosure? 

Foreclosures are sad, financially, and emotionally draining processes that can have long-term effects in the future. 

Some of the negative impacts of foreclosure include: 

• Losing your home

• A drop in your credit rating (drops by as much as 100-150 and can stay on your record for seven years) 

• Loss of income and financial strain

During a foreclosure process, the bank may forgive some of the balance you owe. However, this is regarded as income by the IRS and will be taxed accordingly.

Can I Sell My House to Avoid Foreclosure?

Yes!

If you want to get out ahead and avoid the flow-on effects of foreclosure, then you can sell your house to prevent this situation. However, your chosen sales strategy will depend on several factors, including the outstanding mortgage balance, whether the bank has started the foreclosure process, your financial circumstances, and more.  

To avoid foreclosure, you will generally have two strategies:  

1. A short sale

2. Sell your house for cash 

For example, at Homefield Homebuyers, we buy houses Minneapolis homeowners need to sell quickly and pay cash quickly! However, don't worry if you're unsure what these options mean; we'll break them down below! 

What Is a Short Sale?

Let's say you need to sell your house quickly, but your mortgage balance is more than what you could potentially sell it for. For example, you want to sell the property for $100,000 but owe $115,000 on the mortgage repayment. In this case, you are selling short. 

If you negotiate with the bank, they may be able to forgive the difference between the sale price and the outstanding balance, i.e., the $15,000. The money from the sale then goes to the bank.

However, remember that the bank has the final say on whether the difference is forgiven. 

How Long Does a Short Sale Take?

Don't be deceived by the name.

There is a lot of paperwork and administrative back-and-forth in a short sale, which is far from a fast process. A short sale can take up to six months, concerning bank approval and internal approvals. 

What's an As-Is Cash Offer?

An as-is cash offer is when you sell your property to a home-buying group that purchases the property without a loan or mortgage backing the purchase. As-is cash home buyers will also quickly buy properties with outstanding maintenance issues or ongoing projects. 

For example, at Homefield Homebuyers, we are one of the best companies that buy homes for cash. We specialize in purchasing homes in any condition, often when sellers are facing financially challenging situations like foreclosure.

With our local experts, you can trust in a fast process and a fair offer that can help you avoid foreclosing on your home and the consequences of that event on your credit.

Why Is a Cash Offer a Better Option?

Depending on how much you owe, an offer from a cash home buyer may be the best option to get you out of the foreclosure system and lingering impacts. 

For example, if you have built up some equity and owe $50,000 on a $120,000 home, a home-buying company may offer you an as-is deal to cover the remaining amount and maybe a bit more. The added benefit is that through this strategy, you can avoid complex administration and legal processes and risk your financial future on the whim of a bank that may or may not accept a short sale. 

Homefield Homebuyers Helps You "Sell House Fast, Twin Cities"

Selling due to a threatening foreclosure is never an enjoyable thing to do. However, resisting panic and the temptation to sell at the first offer is essential. Instead, research a cash buyer company with a solid reputation that buys homes. Look for a local team with a community-first focus and positive online reviews, just like Homefield Homebuyers. 

We are cash buyers who make cash offers within 24 hours of seeing your property and can close within a week. So there's no need to go through a lengthy legal back and forth with the bank, ongoing administration, and a six-month wait to finally finish the foreclosure mess.

If you're facing a threat of foreclosure or are interested in the process, then reach out to the team at Homefield Homebuyers today.