During this time of economic uncertainty, foreclosure activity is up 57 percent nationwide. If you find yourself financially strapped, it may be necessary to do away with what you own and that includes property. Selling your home for less than what it is worth through a short sale is one way to avoid foreclosure. But will your entire mortgage debt be wiped clean after a short sale?

What is a Short Sale?

When your home is sold for a lower price than the amount remaining on the mortgage, it is considered a short sale. Many mortgage lenders will accept less than they are owed to avoid the paperwork involved in the foreclosure and then having to turn around and sell the home.

A short sale is a bit more complex than a typical house sale. Not only is the home sold for a lower amount than what you see on your mortgage loan, but the remaining amount of the loan needs to be considered in your decision because it may still be owed after the sale is completed. A short sale is one way to avoid foreclosure and possibly maintain your credit score, depending on the circumstances. However, some homeowners earn too much money or have too much value in their assets to qualify for a short sale. 

The economic downturn could force many homeowners into foreclosure as many people continue to struggle with inflation and the impacts of the pandemic. Some homeowners may be able to fall back on equity or sell their homes and pay off their mortgages. However, we have already seen a decline in the sale of existing homes for nine consecutive months. In just the third quarter of 2022, there were nearly 93,000 foreclosure filings and parts of Illinois had some of the greatest numbers of foreclosures filed.

Missed Payments

Foreclosure judgments in 2023 could increase and if you do not take action your home could slip away. A late payment made during the grace period is not cause for concern. But repeated missed payments are more serious and bring you a step closer to foreclosure. 

Two Options to Avoid Foreclosure

If you are behind on your mortgage you cannot afford to ignore the situation. It would be a good idea to consider the assistance of real estate attorney to help you with these two possible options to avoid foreclosure:

Interest rates on home loans in Illinois are double what they were a year ago. This has created less competition for buyers, and many markets are seeing frequent price drops and fewer offers, giving buyers the upper hand in negotiating the best price. So maybe you are ready to take the plunge and use your savings for a down payment on your first home. If you are a first-time buyer it can be a bit nerve-wracking and overwhelming. But an experienced Illinois real estate attorney can guide you through the home-buying process and make sure that you thoroughly understand everything you sign.

Offer and Negotiation

Once you know how much you can spend, you will tour various homes until you find the right one for you. The official buying process begins when you make an offer in writing. A real estate attorney will help you draft an offer that makes sense financially and protects your rights. The seller could accept the offer, make a counteroffer, or reject the offer. But if there is an agreement, a signed offer becomes a purchase contract. A real estate attorney will review the terms of the contract to ensure they are reasonable and fair to you as the buyer. The attorney will address any issue with the seller's attorney before the sale proceeds.

Three Property Issues that Can Surface

A real estate attorney will also make sure that you have a solid understanding of the requirements for a loan and what you will pay at closing. Once the purchase contract is approved the real work begins, including an inspection of the house and documenting any needed repairs. During this time, three potential problems related to the home’s title may surface:  

Purchasing a home is probably the biggest investment you will make in your life, and when you find your dream home you are probably going to be excited about locking it in with a big down payment. But online scam artists are ready to take your hard-earned money. Wire fraud is now the fastest-growing scam in the United States, up more than 1,000 percent between 2015 and 2017. If you are buying a home a skilled real estate attorney can guide you through the process and help you avoid any pitfalls.

The Scam: Fake Wiring Instructions

The FBI reports there are phishing scams to divert your down payment and closing costs into a fraudulent account. Typically, it comes across as last-minute changes to your wiring instructions. The scams are astronomically successful and translate into nearly $1 billion in real estate transaction losses.

Closing Funds

The lender will give the buyer the closing disclosure three days before closing. It contains an estimate of the amount necessary to close. The actual amount is usually obtained by the real estate closing attorney who informs the buyer.

“Zombie foreclosures” in Illinois are haunting homeowners well into the holiday season and  Illinois has the fourth overall number of zombie foreclosures in the United States. Perhaps you are facing this situation and need a real estate attorney to avoid losing your home to foreclosure. Or worse, maybe you already lost your home to foreclosure and are just finding out that outstanding debts on the property are still your responsibility. At Newland & Newland, LLP, we work tirelessly to keep you from losing your home in the first place by finding solutions to try to prevent foreclosure.

What is a Zombie Foreclosure?

Zombie foreclosures tend to stick around because the title of the house was never transferred from the original owner to the bank or the new homeowner. Some residents in Illinois are being billed for overgrown weeds and demolition costs on properties they thought they no longer owned. It is always good practice to check public records to make sure the deed is transferred to the new owner, even if you moved out of your home due to foreclosure.

Prevent a Foreclosure of Any Kind

In Illinois, foreclosure involves a judicial process that takes more than five years to complete. Here are two ways to prevent foreclosure: