Experts agree that a large-scale foreclosure crisis like the one we saw in 2008 is unlikely, which is good news for the housing market. As First American Chief Economist Mark Fleming, says:

“. . . don’t expect a housing bust like the mid-2000s, as lending standards in this housing cycle have been much tighter and homeowners have historically high levels of home equity, so there likely won’t be a surge in foreclosures.”

Data from the Mortgage Bankers Association (MBA) helps tell this story. It shows the overall percentage of homeowners at risk is decreasing significantly with time (see graph below):

Despite the fact that the number of homeowners at risk is very low, a small percentage of homeowners may be facing foreclosure as a possibility today. It can be beneficial to understand your options if you are experiencing difficulties. It all starts with understanding what foreclosure is. Investopedia defines it like this:

“Typically, default is triggered when a borrower misses a specific number of monthly payments . . . Foreclosure is the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property.”

The good news is there are alternatives available to help you avoid going through the foreclosure process, including:

• Reinstatement

• Loan modification

• Deed-in-lieu of foreclosure

• Short sale

But before you go down any of those paths, it’s worth seeing if you have enough equity in your home to sell it and protect your investment.

You May Be Able To Use Your Equity To Sell Your House

Equity is the difference between what you owe on the home and its market value based on factors like price appreciation.

Due to the recent home price appreciation, many homeowners in today's real estate market have far more equity in their homes than they realize. According to CoreLogic:

“The total average equity per borrower has now reached almost $300,000, the highest in the data series.”

So, what does that mean for you? If you've lived in your home for a few years or more, chances are its value and equity have increased dramatically. Furthermore, the mortgage payments you made during that time reduced the balance of your loan. If the current value of your home exceeds the amount you still owe on your loan, you may be able to take advantage of the difference.

Rick Sharga, Executive VP of Market Intelligence at ATTOM Data, explains how equity can help:

“Very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure. . . We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”

Lean on Experts To Explore Your Options

Work with a local real estate professional to determine how much equity you have. They can estimate the value of your home based on recent sales of similar homes in your area. You might be able to sell your home in order to avoid foreclosure.

If you discover that you need to pursue other options, your agent can also assist you with that. They'll be able to connect you with other industry professionals, such as housing counselors, who can look into your specific situation and advise you on the next steps if selling isn't your best alternative.

Bottom Line

If you’re a homeowner facing hardship, let’s connect so you have an expert on your side to explore your options and see if you can sell your house to avoid foreclosure.