It never fails….
The foreclosure auction is about 7 days away and the phone starts ringing off the hook.
Homeowners calling, saying they haven’t made a payment in many months and now their house is going to the auction and they need help.
…And Realtors calling, saying that they’ve had a listing for the last 7 months and the homeowner just told them that they haven’t been making payments for the last 3 – and that is usually AFTER the Realtor got a call from an investor that found the property on the foreclosure list.
So why do homeowners wait so long before getting the help they need?
Well, the reality of why they wait is simple….
Death.
Not death like someone died. But financial death. The death of their ability to get themselves out of this situation on their own. The American Dream is to get educated, work hard, and own your own home. When hardship strikes, the payments become unaffordable, and the reality of possible foreclosure sets in, the owner experiences emotions similar to those present as if someone had actually died.
It is at this point that they begin down the path of the 5 stages of grief.
1. Denial and Isolation
2. Anger
3. Bargaining
4. Depression
5. Acceptance
Unfortunately, since it isn’t until they reach the Acceptance stage that we get the call to help them, they are nearly out of time. But understanding each stage as it relates to a foreclosure situation, and identifying it early, can result in that homeowner getting the help they need BEFORE it’s too late.
1. Denial and Isolation. This is usually when the homeowner has only missed one or two payments. They think it’s only temporary and that they’ll figure out a solution on their own, getting “back on their feet” soon. They may withdraw from family, friends, etc. while they try to get a handle on things.
2. Anger. The homeowner may become furious about the situation, trying to blame others like his employer for reducing his wages, the bank for continuously calling him demanding the money without listening and caring about the situation, himself for getting a crappy mortgage product in the first place, or just the world in general as it seems to be collapsing on him.
3. Bargaining. This is when the emotional attachment to the house is still strong and the owner will try to work with the bank to fix the situation, usually by applying for a modification. The modification process can take many months and be very frustrating in itself, only to increase the anger.
4. Depression. The owner has now realized that modification isn’t going to work, they start to get tons of mail from various people talking about their impending foreclosure, mail from their lender demanding full payment, mail from bankruptcy attorneys, and so on. Often, after a few days, the mail doesn’t even get opened any more as the owner isn’t sure what to do.
5. Acceptance. While they wait for the impending inevitable, they begin to accept that they’ve done all they can for themselves, and now it’s time to talk about their situation with a professional to get some help and stop the foreclosure.
Since Texas is a non-judicial state, meaning the lender only has to provide 21-days notice prior to foreclosing on the 1st Tuesday of the following month, waiting until the acceptance stage to seek help is often too late. Ideally, its during the bargaining stage, while the homeowner is usually trying to modify their loan with the lender, that is the ideal time to talk about the option of short sale. Although there still may be some denial present, thinking that they’ll be able to get it done on their own, it’s important to at least discuss the short sale option with them – since the reality of loan modifications is that only 14% are approved. More on that in another post.
Seeking advice EARLY is key to increasing the likelihood that foreclosure can be avoided altogether and knowing these stages can be the key to preventing financial death.
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