If your home has been foreclosed, you’re probably wondering what your options are at this point. Going through the foreclosure process is stressful, and having to figure out what to do next only adds to that. Fortunately, you do have options. There are few ways you may be able to stay in your home after foreclosure. Or if you decide it’s better to leave, you have options there too. Here’s what you can expect to see after the foreclosure process has run its course.
Written by Mark P. Cussen, CFP® , CMFC.
Updated September 30, 2021
If your home has been foreclosed, you’re probably wondering what your options are at this point. Going through the foreclosure process is stressful, and having to figure out what to do next only adds to that. Fortunately, you do have options. There are a few ways you may be able to stay in your home after foreclosure. Or if you decide it’s better to leave, you have options there too. Here’s what you can expect to see after the foreclosure process has run its course.
Your Options After the Foreclosure Process Ends
Your options after a foreclosure will depend in part on your state’s laws and the type of foreclosure you went through. Some states require lenders to foreclose through the court system. These are called judicial foreclosures. Other states allow lenders to foreclose without getting a court order. These are called non-judicial foreclosures. There are also mortgage and non-mortgage foreclosures. If you default on your mortgage loan, you face a mortgage foreclosure. If you default on paying property taxes or HOA dues, you can face a non-mortgage foreclosure such as a tax sale or HOA foreclosure.
In some states, you may also be required to pay a deficiency judgment. This covers the difference between how much the home was sold for at the foreclosure sale or auction, plus any fees or costs, and how much you had left to pay on the mortgage loan.
Depending on which state you’re in and the details of your foreclosure, your options at this point include:
Getting the home back through the right of redemption;
Tenting the home from the new owner;
Leaving voluntarily after the foreclosure sale;
Doing a cash-for-keys agreement with the new owner; or
Staying in the home until an eviction procedure begins.
Buy Back the Home Through the Right of Redemption
This may be the simplest and most preferable option, but it’s also a costly one. Once the foreclosure sale is complete, you may have a specific window of time to buy the house back from the purchaser who bought it at the foreclosure auction as the highest bidder. This time period can range from one month to one year, depending on the state you’re in.
You will have to pay for the total cost of the home plus interest and other fees. And in some states, you may also have to pay off the existing mortgage plus interest and fees. This is often difficult to do. Most people don’t have the cash to pay for the house outright. If they did, then they wouldn’t have missed payments and faced foreclosure. But if you are able to get the money, this is a great option to keep your home.
The procedures for exercising the right of redemption vary by state, and some states don’t offer this right at all. Your state may also grant you the privilege of staying in your home without having to make any mortgage payments to your loan servicer during the redemption period. If your state has this provision, then you can use this time to try and repair your credit and financially prepare yourself to find a new place to live.
Saving Your Home Before the Foreclosure Sale
If you’re struggling to make your mortgage payment and you’re worried about foreclosure, it’s best to act as soon as possible. Lenders offer loss mitigation options, but many of these are only available to you prior to the foreclosure sale. You may be eligible for a forbearance or mortgage loan modification to help make your payments more manageable. This can prevent the lender or lienholder from having to foreclose on your home or real estate. Virtually any alternative is preferable to foreclosure, which can damage your credit score and make it much more difficult to find new housing.
Rent the Home From the New Owner
Some mortgage lenders and investors offer programs that allow you to rent out your home after it’s foreclosed. This at least prevents you from having to move all of your belongings or change neighborhoods and schools for your kids. Of course, you’ll need to make sure that you can afford the rent payment. If the new property owner takes out a mortgage, they will charge you enough to cover their loan payment and make a profit. So your monthly rent may be higher than your mortgage payment was. If so, this is probably not a great option for you, and you’ll want to seek out more affordable housing.
Voluntarily Leave After the Foreclosure Sale
If you can’t stay on as a tenant in your current home, you can voluntarily leave or wait to be evicted (covered below). While it may be difficult to find new housing, leaving voluntarily comes with many benefits. For one, the current owner won’t have to file an eviction lawsuit. This will give you a better chance to find new housing. Having both a foreclosure and an eviction in your past will make many landlords wary to rent to you. So it’s best to avoid eviction when possible.
Cash-for-Keys Agreement With the New Property Owner
In some cases, the new property owner may be willing to make you a cash offer to leave your former home peacefully by a certain date. This type of agreement usually requires you to leave the home in good condition. This means you’ve moved all of your belongings out and cleaned and vacuumed the entire residence. You’ll also need to putty and paint any holes in the walls where pictures were hung and make sure to address other signs of wear and tear. The yard and grounds must also be left in good condition.
A cash-for-keys agreement could be anywhere from a few hundred to a few thousand dollars. The amount will depend on how soon the new owner wants you out of the property and the condition you leave the property in. You can use this money to help you find a new place to live, and it may be enough to cover the security deposit for an apartment or rental property. You can also request a cash-for-keys agreement with the new owner. They may be willing to agree because this is generally cheaper than paying for eviction proceedings.
Stay in the Home Until the Eviction Process Begins
If you refuse to move out after the lender has given you a notice of default and the foreclosure process is complete, then the new owner will be forced to begin the eviction process against you. In some states, this procedure can begin once the notice of sale has been issued and the sale date has passed. In other states, the redemption period must expire first. So the amount of time that you’ll have to vacate the premises varies by state and other circumstances. In some cases, the new owner may be able to fold an eviction lawsuit directly into the foreclosure proceedings, while in others a separate eviction lawsuit must be filed.
You will usually be given an eviction notice a few days before the actual eviction will be enforced so that you have time to vacate the premises before the eviction deadline is reached. If you don’t leave during this window of time, then the new owner will have the sheriff come and forcibly evacuate everyone from the house, and movers will come and remove all of your possessions. To avoid this stress and embarrassment, it’s best for you to leave on your own terms before the eviction deadline hits.
Foreclosure is stressful. Not only do you risk losing your home, but you may also have to find a new place to live and move. After the foreclosure sale, you have several options. You can get your home back through the right of redemption in some states, though this requires being able to make a large payment. In some cases, you may be able to stay in the home as a tenant of the new owner. If you choose to leave voluntarily, you may be able to do so with a cash-for-keys agreement. This will give you some money to help you move, but it requires that you leave the home in good condition and by a certain date.
A foreclosure will drastically impact your credit score and stay on your credit history for seven years. It’s best to avoid it altogether if possible. You can contact your lender to ask about their loss mitigation options. Do this as soon as you anticipate having difficulty paying your mortgage. It’s very difficult to get a foreclosure overturned once the process is complete. The only exception is if there has been significant wrongdoing during the process.
If you need help dealing with your foreclosure, contact a qualified foreclosure attorney or a housing counselor.