Pre-Foreclosure & Distressed Property Questions

If you’re behind on your mortgage or concerned about foreclosure, you may have more options than you realize. Acting early can make a meaningful difference in protecting your credit, finances, and peace of mind.

How much time do I have? Do I need to act now?

The earlier you take action, the more options are typically available. If you anticipate difficulty making your mortgage payments, it’s best to explore your options as soon as possible. In many cases, selling before foreclosure — including a short sale — requires time to obtain a qualified buyer and complete lender review.

Do I have to be in default to sell or qualify for a short sale?

Not necessarily. Many lenders will consider requests from homeowners who are not yet in default but are experiencing a legitimate financial hardship that could lead to default if the property does not sell.

What happens if I do nothing?

If mortgage payments are missed and no action is taken, the lender will eventually proceed with foreclosure. This can result in a foreclosure on your credit report, possible liability for a deficiency balance, and potential tax consequences.

What options do I have before foreclosure?

Depending on your situation, options may include selling the property before foreclosure, negotiating a short sale with the lender, or exploring other lender-approved alternatives. Each situation is unique and requires careful evaluation.

Will I receive money from the sale?

In most distressed sale situations, including short sales, lenders generally do not allow sellers to receive proceeds from the sale. However, rules vary by loan type and lender and may change over time. In some cases, debt forgiveness itself can be a significant financial benefit.

What if I file for bankruptcy?

Bankruptcy may temporarily delay foreclosure proceedings. Once bankruptcy protection is lifted or the property is discharged, the foreclosure process typically resumes from where it left off.

Which is better for my credit: foreclosure or a short sale?

A short sale is often reported as “settled debt” and is generally less damaging to credit than a foreclosure.

What should I know about forgiven debt?

When $600 or more in debt is forgiven, the lender may be required to report the forgiven amount to the IRS on a Form 1099-C. Because legal and tax implications vary, it’s important to consult a qualified legal or tax professional regarding your specific situation.

---

Final note

If you are facing a distressed situation, you are not alone — and you are not without options. Early guidance can help you understand the choices available and determine the best path forward. If you are facing a pre-foreclosure or distressed situation, timing matters. Reaching out early can help preserve options and reduce unnecessary stress. Contact Property Choices Real Estate to discuss your situation confidentially and understand the paths available to you.