We work with people in foreclosure all the time; most situations end well, but some don’t. So, we got to thinking, what are the key mistakes that the people in situations that don’t end well make.

We regularly go to the county sheriff sale where foreclosed houses are auctioned off, and there is nothing more upsetting than seeing a family break down after they realize they just lost their house and now have no more time to clear out their belongings.

We talked to many of those people and asked them if they could narrow down 3 key mistakes they made, what would they be.


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Well, the same 3 answers kept coming up:

  1. Waiting too long to act
  2. Not understanding the legal consequences of foreclosure
  3. Not considering other options

Waiting to long

This is the number 1 problem we see over and over!

It always seems easier to just put off the reality of the situation. Some of these people said they felt like if they ignored it, it would just go away. Unfortunately, they found out the hard way that wasn’t the case, and said they would do anything to go back in time and explore their options. 

We even personally worked with 1 person who held our letter on his fridge until the very end. He wanted to wait until he received “official” foreclosure letters from his bank, so he waited and waited until the last minute. By that time, it was too late, and we had no solutions to offer him.

 

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Not understanding what foreclosure really is

Most people have no idea what foreclosure even really means, or how the process works. They just know that in general, if you don’t pay your mortgage, sooner or later the bank will take your house. Well, there is a lot more to it than that.

Foreclosure is a process that is started when a bank files paperwork with the county stating they would like to start a foreclosure case because they haven’t received their mortgage payments.

did you know

Indiana law says the bank doesn’t even have to notify you before they file a foreclosure complaint.

Once that paperwork is filed, the foreclosure process has officially begun. Everyone has heard of that person that lived in their house for “free” because it took so long for the bank to foreclose and some of those stories are true, but they definitely are not the norm. The problem is people hear these stories and think that will be the case for them so they wait to do anything. The exact problem explained in number one. 

The reality is the foreclosure process for occupied houses can be as little as 5 months in Indiana and 7 months in Illinois. Think back what you were doing 5 months ago, it really isn’t much time. 

Another very important misunderstanding is judgement deficiencies. I am not an attorney and don’t provide any legal interpretations, but both Indiana and Illinois allow judgement deficiencies by law.

What is a judgement deficiency?

It is simply a lawsuit ordering the homeowner to pay the difference between their mortgage amount and the price the bank collects at sale.

  • i.e. You owe $200k on your house,
  • the bank forecloses and sells it for $150k,
  • they can file for a judgement deficiency of $50k against you.

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Still with me? Then let’s move onto #3.

Not considering other options

For some reason, people think they only have a few choices, pay the bills, wait for the knock on the door to tell you to leave, or walk away now. Lucky for you, there are many more options out there. We have an entire document that explains the many different options available, and if you are interested in it, just send us your email by filling in the box to the right. I will quickly highlight the most common ones below:

Do Nothing – If a homeowner does nothing, they most likely will lose their home at sheriff’s auction. This option obviously has the worst consequences to the homeowner. 

Deed in Lieu – This is where the bank agrees to accept ownership of the property. It  is actually a “voluntary” foreclosure, and has similar consequences to “doing nothing” including showing as a foreclosure on your credit report for up to ten years.

State Assistance – Both Illinois and Indiana have set up funds to assist qualified homeowners facing mortgage problems. The program rules and qualifications vary. When you fill in the form to the right, we will include the contact info for these programs with the other foreclosure options.

Short Sale – This is the most common solution to those unable to afford to bring their mortgage current. If the balance owed on the mortgage and other liens is more than the property’s current value, a sale may be negotiated with your lien holder(s) a.k.a. bank. We will handle this entire process for you, and it isn’t much different than a regular sale. It can have the least impact on your credit and allows you to sell your house on your own terms, not be forced out by the bank.


I know this article had a lot of information to process, and many times this is all new to the person reading it. Most importantly, we want you to know that we are here to help. If you have any questions, we encourage you to join our exclusive private group below.  

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