When people purchase homes in Connecticut, they might not think that they will ever fall behind on their mortgages or become in danger of foreclosure. Unfortunately, some people experience financial difficulties when the economy falters and are unable to keep up with their payments. There are a few options that they might have before losing their homes, including a pre-foreclosure sale.
People who default on their mortgage payments will be sent a letter from their mortgage lenders that they are in danger of foreclosure if they cannot bring their payments current. In some cases, they might negotiate with their lenders to sell their homes in pre-foreclosure sales. They will be allowed to continue living in their homes until they sell. If the sales fully satisfy what is owed, they will have avoided foreclosure and can look for new homes.
If a home sells for less than the balance that is owed, it is called a short sale. The lender may agree to forgive the balance. However, the IRS counts many types of forgiven debt as income that must be reported. There are a few exceptions to the income reporting requirement, including bankruptcy, the Mortgage Forgiveness Debt Relief Act, and insolvency.
People who are in danger of foreclosure might want to explore different options for avoiding it. Going through a foreclosure can have negative impacts on their credit scores and lives. Speaking to an experienced real estate attorney about the options that might be available may help people to plan. In some cases, it might be possible for people to save their homes. In others, an attorney may negotiate with the mortgage lender to try to secure an agreement for a pre-foreclosure sale of the home. It could have an impact on a person’s credit, but the impact will not be as substantial as a foreclosure.