In the event that an individual encounters the prospect of a potential foreclosure, there exist a number of options and decisions which must be carefully weighed; it is at this juncture which is classified as the period of pre-foreclosure. Pre-foreclosure brings with it the very real possibility that an individual will be forced to undergo property foreclosure, and as a result, will also be susceptible to a host of prospective ramifications ranging from personal to financial in nature.
Ramifications to be weighed during the Period of Pre-foreclosure
As a result of foreclosure, individuals have undergone many of the following ramifications:
• The placement of the foreclosure on an individual’s permanent financial record(s)
• The degradation of credit score and/or line of credit
• A requirement to file bankruptcy
• An inability to receive future loans and/or mortgages
• The inability to own, buy, or sell property
• Repossession of property, assets, monies, and possessions
Pre-foreclosure and Credit
Upon a short sale during pre-foreclosure, a lender can determine the nature in which they will report the debt to the companies that regulate credit; there exist two options:
1. A lender will report the debt as being satisfied, in order to spare the individual borrower the reduction of both credit score and/or individual line of credit.
2. A lender will report the debt as being unpaid, resulting in the damaging of an individual’s credit score and/or line of credit; the inability for the individual borrower to receive future loans can result from foreclosure
Foreclosure vs. Short Sale during the Pre-foreclosure Period
In the pre-foreclosure period, the lender – or financial institution will have the opportunity to decide whether or not to proceed with the foreclosing of the property in question. While the opportunity to avoid foreclosure is almost always the most ideal circumstance, many factors exist in this decision:
Short Sale during the Period of Pre-foreclosure
In this instance, the lender will agree to sell the property on whose payments the borrower has defaulted; as a result of doing so, the income earned from the sale will be put towards the satisfaction of any outstanding debt with regard to property and/or mortgage loans. However, once a property undergoes a short sale, it becomes neither the property of the lender nor the individual borrower.
A foreclosure is the forced repossession of property, and in certain cases, an individual will choose to avoid a short sale during the period of pre-foreclosure. An individual may choose to risk the prospect of foreclosure by forgoing a short sale in order to obtain a loan – or additional funding – that will allow for the outstanding debt to be supplemented.
The parameters and conditions surrounding both the prospect and ramificationsexisting during the pre-foreclosureperiod vary on an individual basis; both in conjunction with the borrower’s respective state of affairs, as well as the current status of the outstanding loan in question. In the event that an individual experiences difficulty understanding the period of pre-foreclosure, they are encouraged to consult an attorney specializing in real estate, property, finance, debt and/or collections, and contracts.