Losing your home is a painful experience that is always very emotional. This is because it involves saying goodbye to the one place you counted on to give you peace at the end of a long and tiring day. But now that the chips have fallen due to financial troubles and your lender has taken over the property, what are your options?
For many people, this is often a time of desperation as no one is ever prepared to lose their property forever. Nevertheless, with little room to make any other changes, there is always the pressing question – can a family member buy my foreclosed home?
A look into the facts about foreclosed homes
Foreclosure always happens when homeowners can no longer keep up with their mortgage payments and have to forfeit the home back to the lender. The lender’s goal is to sell it as fast as possible to recover the sum owed. As such, foreclosure is always the last resort that a lender (bank or Mortgage Company) will opt for in their endeavors to get back their money.
This is why before the lender can initiate the foreclosure proceedings, homeowners have other alternatives they can always opt for. However, once a Notice of default has been provided, it is a race against time, which is never easy to beat. Most popularly, there are two options for the property owner, and these are;
- Short sale
- Cash sale to home investors.
Short sale restrictions
In a short sale, the homeowner is expected to make a ‘desperate sale’ under the lender’s authorization. Since the amount to be received from the sale is less than the actual amount owed, several restrictions must be adhered to. One such limitation is the “arm’s length restriction” that prohibits the homeowner (borrower) from selling the property to a family member.
The primary reason for doing this is to avoid mortgage fraud and other loopholes that borrowers might gain at the lender’s expense. As such, selling the property to a family member during a short sale is not a valid option. This is because it will open a can of worms that will attract the state and federal government’s attention.
What happens after foreclosure?
Since the lender wants to recover money as fast as possible, a home that has been repossessed will be put in a public auction. In these auctions, there are no restrictions on who can bid and emerge as the winner. In these auctions, you or your family member can make a bid like everyone else and hope to emerge as a winner.
The problem with waiting until this last stage to try and win back the home is that there is never a guarantee that a family member will purchase. This is because auctions typically focus on the highest bidder, and you never know how much the rest of the competitors are willing to spend.
When looking to buy a foreclosed home, a rule to abide by is to put in the legwork and get as many details as possible from the lender before choosing to involve a family member. Since lenders always go for foreclosures as a last resort, you are still better off working on your options before things get out of hand. Cash Buyers Network is a team of home investors who can help you save face during these moments.