Why would a pre-foreclosure home owner not be motivated?

Question

Why would a person who is in pre-foreclosure with a deadline quickly approaching not be motivated to sell their house? They are going to be homeless real soon if they don't pay what they owe. Why are they not motivated to sell knowing they are going to be out on the curb?

Jay Hinrichs · Answer

lenders were mandated to do this.. and lenders LOSE a ton of money by taking a property all the way through the process any way to keep owner in there and get some payments coming is better for the bank.. they have to then do a Mark to market and that can kill their reserve collateral % .

I did a ton of foreclosure rescue in my day prior to 08..  it was a waste of time we found out to talk to any one who was not within about 3 to 5 days of the auction sale. REASON.. most of the time they work something out.. with lender or relative or whatever.

when they get a matter of days before the auction that's when it gets real.. and you as an investor have to know what your doing .. you have to be able to do your own date downs or get the title company to do.  you got to get them to deed you the home and then you have to courier a cashiers check to payoff the loan in full or reinstate it.. usually 1 day before the auction.. that's why you see so many auction properties pulled right before the sale.. that's when the deals are made.. most investors simply cant do this.. its darn hard.. and there is risk because there is no title insurance.. etc etc. and you need the CASH..

Chris Mason · Answer

If it has a bunch of equity, the fact that it got to that point (pre-foreclosure) pretty much tells you that the owner is burying their head in the sand like an idiot, rather than facing reality and acting accordingly.

Confirmation bias. Every time that owner gets a notice in the mail or posted to his/her door, they don't want it to be real, so they hop on google and find a zillion (true) stories about people that continued to live in their home -- without making any payments -- for a decade or more.

Lynn McGeein · Answer

I'm amazed at the deals lenders will make with owners, even those who stick their head in the sand and wait until the last minute.  I know one lender recently agreed to add the back amounts owed to be split equally to the next 12 future payments, even though the owner hasn't been able to make the existing payment, so not sure why lender thinks they're going  to be able to pay so much more.  And this was after already allowing a payment reduction two years earlier instead of foreclosing then.  The sad thing is that they do have a nice amount of equity and could sell, take the money, rent a while and start over with something smaller, but they just don't want to move from their home, so they'll hang on as long as the lender allows, even if it means losing it all later on.

Chris Mason · Answer

Just think through the scenario and put yourself in the place of the lender.

It's also possible that the lender knows they can't foreclose b/c they did some paperwork in a shady way back in 2006 when the owner last refinanced, that a judge would call out.

Tony Marcelle · Answer

What happens if it's not a HELOC lender?

Chris Mason · Answer

Let's say you stop making payments on your HELOC and your house is underwater.

At foreclosure, that HELOC lender wouldn't make a dime.

If they just stick it out, maybe the home appreciates and eventually isn't underwater, and maybe the owner sells at that point.

So why, if I am that HELOC lender, would I initiate foreclosure?

Tony Marcelle · Answer

How it possible to live in a house that is supposed to be foreclosed on that long for free?

Tony Marcelle · Answer

That's crazy right? It makes no sense to be denial that long rather than face the facts that they better start coming up with a solution like real soon or else. Those notices on the door are not put their for decoration. No pre-foreclosure homeowner responds to my offer to help with their situation by buying their home. Maybe some people like living under the freeway.

Sean Lambert · Answer

Denial.

Greg Parker · Answer

@Chris Mason pretty much answered it.  And, usually, there is no equity.  So, let's just live there free(I know a guy who lived in one for 5 years without making a payment).

Why would a pre-foreclosure home owner not be motivated?

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