Most loans from a bank must be 120 days delinquent before any foreclosure activity starts. The number one reason why we advocate pursuing a short sale vs. a foreclosure, is that a foreclosure (regardless of whether it is a non-judicial or judicial foreclosure), will prevent you from obtaining a mortgage for a minimum of 5 years, in addition to extensive damage to your credit, whereas a SS will have far less damage to your credit in that most borrowers will be able to obtain a mortgage after 2 years of conducting a SS. Also, the deficiency (or tax consequences) in the event of foreclosure, if is collectable, will be significantly higher than in a SS (since properties sell at extremely discounted prices at foreclosure auctions).
Lenders are very reluctant to agree to take a home back through a deed in lieu of foreclosure for a number of reasons: They fear the homeowner will sue later alleging they didn’t understand what was happening, the lender must pay any second or third mortgages or home equity lines of credit (HELOCs) off before executing a deed in lieu, and the lender wants to be certain that the borrower’s financial distress is real.
So, after the bank has already lost a lot of money on the sheriff sale of the property in foreclosure, they are going to spend even more money and resources chasing after another judgment against the homeowners who were unable to pay the mortgage or first judgment.
Redemption Period Expires: Home Inspections: If an inspection is unreasonably refused or if damage to the property is imminent or has occurred, the purchaser of the property at the Sheriff Sale may immediately begin eviction proceedings to seek possession and terminate the homeowner’s redemption period.
After receiving a NOD from the lender, the borrower enters a grace period known as pre-foreclosure During this time â€” anywhere from 30 to 120 days, depending on local regulations â€” the borrower can work out an arrangement with the lender via a short sale or pay the outstanding amount owed.