When a homeowner finds out they could be losing their house to foreclosure, it can be one of the most stressful times of their life, filled with a mix of emotions like panic, fear, embarrassment and confusion. Indeed the effects of foreclosure can become a dominating factor in one’s life for months to even years!
Effects of Foreclosure – “Why should I care if I get foreclosed?”
The facts on foreclosure agree it is a difficult time: A homeowner will face challenges emotionally and financially. Things will have to change for their family. There are tax implications.
Let’s discuss each in depth.
Draining Emotions
The sum of the above consequences of foreclosure can come together to wear a person out. Though subtle, how a person feels is their emotions and this dictates every decision they make. In fact, this is the number one reason people will take action to avoid foreclosure. When you might be losing the roof over your head, it’s stressful. People don’t want friends and family to know because that could be embarrassing if their financial challenges weren’t apparent to the public eye. They might be afraid of what the future holds for them and their family. Not to mention — It can be a very confusing time with papers from the bank coming in all directions, and letters from other local businesses who are also aware of the predicament.
Imagine having a foreclosure hanging over your head all the way up until the bank auctions the property and you have to move out! Then it continues to follow you for years while your credit score drags, and banks regularly pass you up when you apply for loans. It becomes harder to rent a house because landlords run credit reports.
Foreclosure & Family
While the effects of foreclosure on family are tied closely to the draining emotional factors, there are some differences. Many homeowners are also the head of the household and probably purchased the house originally to provide for the family.
Whether they lived there for a year or 10 years, it’s a very hard time to be uprooted and relocate on someone else’s terms. The move may have to be quick, and moving costs have to come out of pocket. Often times, a comfortable home is exchanged for sharing a tight space with another relative or tenant, or downsizing to an apartment. Each family member is fully faced with the discomfort of the situation, and it’s hard to stay positive when it seems like the world is falling apart around them.
The neighbors and community are lost. The children will lose their neighborhood playmates and will likely be moved to a new school district forcing them to make it through the painful process of making new friends, meeting teachers, and adjusting overall to a new environment.
Effects of Foreclosure on Finances
Without a doubt, the financial consequences of foreclosure are the first concern for most homeowners.
- “Is my credit wrecked?”
- “Will I be able to buy a home again?”
- “How can I do the things I need to do if I can’t get hardly any kind of loan?”
Let’s first address the credit score. With a mid-ranged credit score of 650 – 800, one might see their credit score drop 90 points. If they started in a higher range, getting close to 750, it would be fair to expect 150 points to be lost. These points can be built back, but it is estimated that it takes around 7 years for your credit report / history to be made new again.
Simply put, the primary consequence to foreclosure is a poor credit score and credit history, resulting in the beginning of a journey of building back credit for years to come.
Taxes can add to the financial problems as well. The most likely case scenario where taxes become one of the negative effects of foreclosure is if the lender forgives the debt and is then legally obligated to report this “income” to the IRS. The following April could be holding a lovely surprise of a large tax bill!
Avoid the Negative Effects of Foreclosure
If you are looking for a solution to avoid the pain of undergoing a foreclosure, you do have some options. You can avoid or stop foreclosure. A solution that has worked for many is selling their house quickly and moving out on their terms before the house forecloses. Their credit is saved! Their family isn’t uprooted on short notice, and the days leading up to the foreclosure date that were filled with fear, embarrassment, and confusion… are all washed away.
The stress is gone! Sometimes, if their home has equity, they can even receive cash from the sale for moving costs, over due bills, or savings.
The type of buyer that can rescue a foreclosing house is not a family looking for a new home. This isn’t a sale listed on the market with a realtor – there’s no time for that! The solution is a cash buyer – an investor that can close quickly and doesn’t have a complicated purchasing process with all kinds of contingencies. It’s a quick, easy sale. Yes, it’s true that the equity, if any, in the home won’t be maximized, when the options are getting fewer and far between, this can be a great way to make a terrible situation turn better.
We Can Help With the Effects of Foreclosure
We help homeowners by providing quick or creative solutions for the easiest home sale possible – Folks just like you. We know this is a difficult time and are here to help, even if you just need someone to speak to so you can collect your thoughts and make a plan.
We can make you an offer within 24 hours of seeing the home, or even quicker if time is of the essence. Give us a call at 615-455-5979, or contact us here.
