When door knocking on pre-foreclosure properties it is important to have an idea of what to say to the homeowner who is facing foreclosure. I like the approach of educating them on what they can expect in the coming months and the ramifications of having a foreclosure on their record.
The first thing I would to tell them is what they will experience as the foreclosure process moves forward. Once they receive a Notice of Default or a Lis Pendens from the bank, they will have a certain amount of time before the bank can foreclosure on their home. The state they live in will determine that amount of time they have. It can range from 30 days to 90 days before the bank can foreclosure on their home.
When the bank forecloses there will be an auction (usually on the court house steps) and the homeowner will be forced to leave the home if they haven’t already. The bank will send the homeowner notices to update them on the process and provide the auction dates. If the homeowner is not reading the notices, the sheriff may come knock on the door and give them a small amount of time to vacate the property.
The property will sell to the highest bidder at the auction. If the highest bidder is the bank, the property will then become a bank-owned property or an REO. Something else to express to the homeowner is that the bank cannot make a profit from a property. They can keep all money owed to them from the outstanding mortgage, interest and fees, but if the property sells for anything more, the bank cannot keep it. If the property sells for a higher amount than what was owed to the bank, the money belongs to the homeowner, but it rarely gets back to the homeowner, so any equity in the home is usually lost. (This is a talking point but not something we want to dive into deeper with the homeowner.)
The next issue the homeowner will run into is their credit will be ruined. It will be at least four years before they will be able to buy a car, get another home, or get any credit at all. It may also make it hard for them to rent anything as well.
These are the realities that a homeowner in a pre-foreclosure will face if they are not able to catch up on their mortgage. Most people do not understand the full scope of what they are facing with a property being foreclosed on. This is a great way to educate them on what is coming.