Foreclosure: Can this Process Hurt Your Home Equity?

Foreclosure: Can this Process Hurt Your Home Equity?

At Detroit Cash for Homes, we have more than 30 years of experience in the real estate industry. We helped countless homeowners to sell their properties quickly and hassle-free. At times, we came across homeowners facing foreclosure, and our professionals assisted them efficiently. Additionally, we buy houses in Metro Detroit in any condition, as-is, without any prior improvements. 

Some of the most common reasons why people suffer foreclosures are divorce, job loss, illness, death of a family member, and many more. Due to these situations, homeowners may find themselves in a tight spot when paying mortgages. As a result, they fall behind in mortgage payments and face foreclosure. Often, people choose to foreclose their homes thinking that they can get home equity. But there is a catch you need to know before proceeding ahead. 

Your home equity may change depending on various factors. In this post, we will explain what happens to home equity in a foreclosure. Before diving into this, you need to have a basic understanding of equity. 

What is equity?

One of our clients, Jackson, bought a house worth $300,000. At the time of purchasing, he put $60,000 on the property, which is nothing but home equity. As the years go by and homeowners pay their mortgages, the equity keeps increasing. 

How does foreclosure impact home equity?

Jackson purchased a ranch house in Detroit Metro ten years ago and got 25 years to pay the mortgages, but last year, due to the Coronavirus pandemic, he lost his job. He was unemployed for almost a year. As a result, Jackson fell behind on mortgages. He did not have any idea what to do. With his friend’s recommendation, he approached Detroit Cash for Homes to seek the best guidance. 

First, he discussed his property with us, and he was likely to foreclose his house because he thought it the best option. So, our representative explained to him the fate of his home equity in a foreclosure. Several factors could hurt the equity:

Since Jackson was behind his mortgage payments, he had to face late fees. This means his equity may be impacted. 

If his property goes up for closure, he has to do the home appraisal. Usually, the lender chooses the lowest appraised value, which can significantly reduce the home equity. 

By going forward with the foreclosure, Jackson could lose almost half of his home equity. Therefore, we advised him to sell his house directly to us. After the evaluation, we made a fair cash offer within the next 24 hours. As we buy houses in any condition in Detroit without any repairs and renovations, documentation, showings, and staging, we closed the deal in less than a month. 

If you are looking for the best place to sell your home to stop foreclosure, get in touch with Detroit Cash for Homes. We buy houses in Detroit as-is with fees and commissions. Call us today to know more.