4 Last-Minute Ways to Stop Foreclosure Auction Before It Starts in 2019

Did you know that every person facing foreclosure has at least one option to stop it? If you are facing foreclosure, just remember one thing: You are not alone. Every month, thousands of people fall into some stage of mortgage delinquency.

If you’ve recently found yourself falling behind and unable to catch up on your mortgage payments, take a close look at the 4 alternatives to foreclosure below and decide which best suits your unique situation.

How to Avoid Foreclosure and Prevent Your Home Being Sold by the Bank?

What Is a Foreclosure?

First, let’s start by gaining a true understanding of what a Foreclosure is.

A foreclosure occurs when the Mortgagee (i.e. your Lender) takes possession of a mortgaged property (i.e. your home) when the homeowner fails to keep up with the mortgage payments.

Let’s take a look at this example:

In 2017, James and his wife Marie purchase their dream home. They remain current with their mortgage payments through April 2019. In May, James gets laid off from work. Due to this unforeseen hardship, the couple falls behind on their mortgage payments. After several months pass, their Lender files a foreclosure action.

An important component of the foreclosure process is the foreclosure auction.

A foreclosure auction occurs at the end of the foreclosure process, when the Lender officially takes possession of the home. During this sale, the Lender markets the home to prospective buyers and accepts the highest bid for the property.

Here is a quick, simplified briefing of how a typical foreclosure auction works:

  1. An auction date & time is set by the Lender. The auction will either take place online or in person.
  2. The Lender sets an asking price for the property.
  3. Buyers bid online or in person on the home.
  4. The Lender accepts the highest bidder, then closing is scheduled.

It is important to note that the closer the home gets to the foreclosure auction date, the more difficult it is for you to take the necessary action to prevent the sale!

How to Stop Foreclosure Immediately: 4 Effective Options

Now that we have a better understanding of how foreclosures work, let’s take a deeper dive and explore some ways you can prevent them from happening!

#1 Loan Modification

A Loan Modification is a change made by the Lender to your existing loan terms, as a result of non-payment.

To apply for a loan modification, the Lender will require you to complete and submit a financial package, which they will evaluate.

After all of your documents have been received and evaluation is completed, two major things happen:

  1. The Lender will make a decision as to whether or not they will grant you a modification.
  2. If they do offer you a modification, the Lender will provide you with their proposed “changed” loan terms.

Food for thought: Oftentimes loan modifications actually result in higher monthly payments for the borrower... I know, right!?!?

For a clearer picture of what a loan modification looks like, consider this example:

After suffering from unforeseen health issues, Jose’s income takes a hit. Before he knows it, Jose is 3 months behind on his mortgage payments. Confident that he will eventually turn things around, Jose decides to try and keep his property. After a long and thorough review of his hardship and financial documents, the Lender offers Jose a loan modification, or change in his current mortgage terms.

It’s important to note that your Lender is not obligated to halt the foreclosure proceedings during the loan modification review process.

It is also crucial to understand that your Lender reserves the right to deny your request for mortgage modification, if they feel you are still not financially capable of making the new payments.

So, is a loan modification right for you?

If you are a homeowner who is adamant about keeping your home and believe you can make the payments on the changed loan terms (even if the monthly payments increase), then applying for a loan modification may be the right choice for you.

If you are a homeowner who cannot physically and/or financially keep up with the property and its mortgage payments, then a loan modification may not be the best choice for your needs.

#2 Filing Bankruptcy

The term bankruptcy refers to the courts offering someone the chance to start fresh by forgiving debts that are unable to be paid. At the same time, it offers creditors (in this case, your Lender) the opportunity to obtain some level of repayment (the repayment is usually based on your assets available for liquidation).

In reality, bankruptcy may just buy you some more time, rather than completely let you off the hook for your debts.

The Bankruptcy process can be very long, complicated, and expensive. Consult with a bankruptcy attorney to decide whether this strategy is the right fit for you.

#3 Deed in Lieu

A deed in lieu is when your Lender gives you the option to voluntarily transfer the deed back to them.

Important to note: The Lender is often hesitant to offer a deed in lieu, because of the potential liability risks, as well as having to satisfy the secondary mortgages or lines of credit against the property.

Also important to note: There is a chance that a deed in lieu will have the same impact on your credit as a foreclosure. Consult with a credit expert before proceeding.

Here is an example of a deed in lieu:

Renee is facing foreclosure and decides to put her home on the market for sale. Unfortunately, she is unable to find a buyer, so the property sits for an extended period of time. Although it is not common, Renee’s Lender ensures title is clear, then offers her a deed in lieu option.

Is a deed in lieu the right move for you?

If you’re a homeowner who value’s your credit score or plans to purchase another house within the next 4-6 years, then a deed in lieu may not be the best option.

On the contrary, if you’re a homeowner who is not concerned over your credit score and/or waiting an extended period of time to buy a home, then a deed in lieu may be the right choice for you.

Again, keep in mind this option will only be available to the defaulting homeowner on a case by case basis.

#4 Short Sale

In simple terms, a short sale is when your Lender agrees to let you sell your home for less than what is owed on the mortgage balance. Normally, homes in pre-foreclosure are short-sold to cash house buying companies or private real estate investors, because normal buyers aren’t willing or don’t know how to deal with a real estate transaction that involves foreclosure difficulties.

Read this detailed and comprehensive guide on how to find the right investor to buy your home.

For the bank to consider a short sale, you must be at least 30-60 days delinquent on your payments and the value of your home must be less than your mortgage balance.

Consider this example:

Phil and Nancy are behind on their mortgage payments. Their current mortgage balance is $100,000. However, the value of their home is only $70,000. Phil and Nancy’s Lender approves a short sale on the home, allowing them to sell for the $70,000 that the property is worth. As a result, the bank takes a loss on the remaining $30,000 balance. Most importantly, the transaction does not get recorded as a foreclosure.

Is short selling your home the way to go?

If you’re a homeowner who wants to keep your property, then a short sale is likely not the right move for you.

On the other hand, if you’re a homeowner who wants to get rid of the property, get out of foreclosure, or had your loan modification denied, then a short sale may be the correct path for you to travel.

When dealing with a short sale, it is important to work with an experienced processing company, who can navigate the entire short sale facilitation process from start to finish. It is also helpful to know that such service is completely free to the homeowner.


We’ve discussed four potential ways to defend against foreclosure. So, how will you know which option is right for you?

Ask yourself this simple, yet important question: “What is my main objective for this home?” Your answer will lead you into the right decision.

If you think short selling your home is the right route for you, request a free assessment of your situation to see if you qualify for a short sale assistance.

Written by Bob Vieira

Bob Vieira is the Founder and Managing Partner of Universal Short Sales, LLC. While serving clients as a licensed Realtor, he realized there was a need for a knowledgeable company, specializing in the short sale sector. Bob is an industry expert with a passion for guiding homeowners through the short sale process.

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