Climbing Out of the Foreclosure Pit

RISMEDIA, December 20, 2006-On December 19, the National Association of Realtors published a press release voicing the organization's concern "over the rising rate of defaults and foreclosures occurring in many areas around the country." It warned families to steer clear of "exotic" mortgages and predatory lending practices.

Although this warning is important in helping homeowners avoid the common trap of digging themselves deeper and deeper into debt, it comes too late for the millions of homeowners who are already facing foreclosure.

Ralph Roberts, a 30-year veteran of the real estate industry is no stranger to foreclosure. He lost one of his first homes to foreclosure and runs his real estate business in a state considered by many to be the foreclosure capital of the United States. Throughout his career, Robers has bought and sold foreclosure properties and has helped thousands of people facing foreclosure escape the foreclosure trap.

According to Roberts, "Homeowners facing foreclosure are often too embarrassed or terrified to seek help. What few of them realize is that the longer they wait, the fewer their options. Wait too long, and you end up losing your home, your credit, and any equity you may have built up in that property."

Having been a victim of foreclosure himself, Roberts is driven to be a champion of the distressed homeowner. He encourages everyone involved in the real estate industry, including homeowners, lenders, and real estate professionals, to work together stem the tide of foreclosures.

According to Roberts, "Homeowners need to know their options, and real estate professionals must make distressed homeowners in their area more aware of their options." So what options do you have when facing foreclosure? Roberts provides a list of several options, including the following:

Contact the lender: Homeowners facing foreclosure often make the mistake of avoiding the lender, which is exactly the wrong thing to do. Contact the lender early, explain your situation, and find out your options.

Contact family members or friends: Ask for help. If you were in a position to assist a family member or friend who was facing a similar situation, how would you feel if they didn't ask you for help?

Reinstate the mortgage: If you can come up with enough cash to bring mortgage payments up to date, the lender may agree to hold off on foreclosure proceedings.

Negotiate a forbearance: Your lender may be willing to restructure your payments to help you get back on track after a temporary financial setback.

Refinance out of foreclosure: With a good credit history, you may be able to consolidate your debt with a loan that requires a total monthly payment of less than you're paying on all your other loans put together.

Sell your home: If you owe less on the home than what you can sell it for, sell the home and find more affordable accommodations. Selling the home is what 90 percent of those who are facing foreclosure really need to do, but unless you act quickly, you may run out of time.

Negotiate a short sale: Lenders typically want to avoid foreclosing, because it costs them money. You may be able to convince the lender to accept less than the total amount owed on the mortgage.

Selling the home and renting it back: A real estate investor may be willing to purchase your home and then lease it back to you or sell it back to you on a lease-option agreement, which is like a rent-to-own agreement.

Giving a deed in lieu of foreclosure: If you owe much more on a house than what you can sell it for, you may be able to offer the lender the deed in exchange for them not foreclosing on you. You lose the house but retain your credit rating.

File for bankruptcy: Bankruptcy is rarely the best choice. In most cases, it simply buys you some time, but is often the most costly option.

Do nothing: Doing nothing is, by far, the worst option. It ultimately leads to losing your home, any equity you may have built up in that home, and compromising your ability to qualify for future loans.

In addition to encouraging homeowners to know their options, Roberts recommends that homeowners know their redemption rights. In areas with a redemption period, homeowners may retain possession of the home for three months to a year after someone buys the property at a foreclosure auction.

"Many disreputable investors fail to properly inform the homeowners of their redemption rights," says Roberts, "As soon as they buy the property at auction, they show up at the house and claim that the homeowners must leave immediately. By knowing your redemption rights, you can prevent this from happening."

Roberts also warns homeowners who are facing foreclosure to watch out for greedy investors and con artists. "When foreclosure rates rise, the con artists crawl out from the rocks they were hiding under to prey on the vulnerable homeowners," Roberts notes, "To protect yourself, know your options and know your rights." For more about foreclosure scams and other types of real estate fraud, check out Roberts' site FlippingFrenzy.com .

Ralph Roberts is the author of Flipping Houses For Dummies (John Wiley & Sons, November 2006), coauthored with Joe Kraynak. His upcoming book, Foreclosure Investing For Dummies encourages investors to act with integrity and inform families facing foreclosure of their options and legal rights.

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