Foreclosure is a word no homeowner wants to deal with. Unfortunately, in 2022 Arkansas experienced 1,964 foreclosures, double the rate from the previous year, which saw foreclosures at an all-time low. While real estate is still unsteady post-covid, banks are pursuing the foreclosure process in the event a mortgage borrower doesn’t pay.
If you’re reading this, you may be facing the daunting prospect of foreclosure on your property. Foreclosure can be a challenging and stressful experience, but it’s essential to remember that you’re not alone. As a real estate investor who cares about homeowners in our state, I want to urge you to seek help as soon as possible. The year 2022 brought a significant number of foreclosures to Arkansas, and I’m here to offer my assistance to help you avoid the pitfalls of this process.
The Foreclosure Process
It’s important to note that foreclosure is not a single event, but rather a process. A long, stressful process. The process starts with a missed payment and a letter from the bank. It ends with your house being auctioned to the highest bidder on the courthouse steps. I mean this literally, as houses will be brought to auction to the courthouse, where the general public will bid on the house like you see on TV. The highest bid buys the house on the spot.
I’ve spent my fair share of time on the courthouse steps bidding on houses. I never had a winning bid, and I eventually stopped going to the auctions, but I always felt sad knowing that someone could have prevented this. If the homeowner had acted fast enough, this entire process could have been prevented, and the homeowner could have even made some money! I’ll explain why later, but first, let’s look at the landscape of foreclosures in Arkansas.
Foreclosures in Arkansas
- Rising Foreclosure Rates: In 2022, Arkansas saw an increase in foreclosure rates, with thousands of homes affected across the state. This increase was driven by various factors, including economic uncertainties and unexpected life events.
- Foreclosure Timelines: The average foreclosure process in Arkansas takes approximately 180 days from the date of the first missed payment to the final sale. This extended timeline can create additional stress for homeowners who are uncertain about their future.
- Financial Strain: Foreclosure not only affects homeowners’ credit scores but can also lead to significant financial hardships. Legal fees, late payment penalties, and the loss of equity in your home can all compound your financial woes.
- Types of Foreclosure: Some foreclosures are ordered by a judge (judicial foreclosure), which may be prompted by legal problems such as divorce or criminal activity. Other foreclosures are caused by a bank seeking financial restitution for unpaid loans. This is called a non-judicial foreclosure.
- Responsible Parties: Because foreclosures are a long process, the ownership of the house is often tossed around. In a typical non-judicial foreclosure, you have the homeowner who is many months behind payment, the bank, who issued the loan, and the trustee, who is the now legal-representative of the bank.
The process
Here’s how a typical non-judicial foreclosure process works:
First, the homeowner misses a payment. Usually this is no big deal. The bank will reach out and remind you of your missed payment. If the missed payments continue, the bank will get more aggressive with the notifications and issue a Lis Pendens. This is a legal term, a declaration of legal action against you. It’s also public. When a notice of Lis Pendens is issued, it’s printed on the courthouse steps. This is where anyone, including newspapers, investors, and the general public, will see that you’re not making payments on your house.
Around this time, you should be getting many legal notices in the mail, and maybe even some phone calls. It’s pretty hard to miss. Unfortunately, this is where many homeowners bury their head in the sand and refuse to acknowledge the problem. Hoping it will go away, or that it’s not real, many homeowners will ignore their phone and mail. This is where it gets bad.
Fortunately, it’s not too late! This is a good time in the foreclosure process to call the bank and negotiate payments. Banks don’t WANT to own real estate, they want to own debt. A bank would rather you pay your mortgage than take ownership of your house. So if you call them to arrange payments, you can get in front of the foreclosure process before it becomes too late.
After a notification of Lis Pendens, and if there’s no contact, the bank hires a law firm to take legal ownership of the property. It’s important to remember that even though you’re the homeowner, the bank owns the property if you have a mortgage. Basically, the bank has first dibs on what happens with the house. This is why they can legally pass the property off to a law firm, who is known as the Trustee. The trustee now has full and complete ownership of your house.
The good news, it’s still not too late! At this stage, you may still have time to negotiate with the trustee. Again, banks don’t want to go through this long process, they just want to make money from the loan. If you can contact the bank or trustee, you may still be able to stall the foreclosure process.
Unfortunately, many people at this stage of the process refuse to reach out. Which brings us to the final stage of the foreclosure process, the auction. Once the trustee takes ownership of the house, they announce a date, usually within a few months, that the house will be auctioned off at the county courthouse. This process happens exactly like you would imagine.
A representative of the trustee, usually a paid employee of the law firm, will show up on auction day and say something like: “Next up, the property on 123 Main St, opening bid, $95,000.” Or something to that extent. The opening bid is usually the amount left on the mortgage, plus a little extra to cover legal fees. This is where the sad part happens. Once the general public begins bidding on the house, sometimes the winning bid will be significantly more than what was owed on the property.
Fore example, a starting bid of $95,000 may run up as high as 120, 130, or even $150,000!
Theoretically, the homeowner could have sold their house for $150,000, paid off the bank, and walked away with $55,000 in cash! Why didn’t they?
It’s often because they acted too late.
Why Seeking Help Early Matters
Now that we’ve seen the challenges associated with foreclosure in Arkansas, let’s discuss why it’s crucial to seek help as early as possible:
- Preserve Your Credit: One of the most significant consequences of foreclosure is the damage it inflicts on your credit score. The sooner you seek help, the more options you may have to protect your credit rating and potentially avoid foreclosure altogether.
- Explore Alternative Solutions: When you reach out for help early, you have a better chance of exploring alternative solutions, such as loan modifications, short sales, or refinancing. These options can help you stay in your home or minimize the financial impact of foreclosure.
- Avoid Legal Complications: Foreclosure proceedings can be legally complex, and attempting to navigate them on your own can lead to costly mistakes. Seeking professional assistance can help you understand your rights and options.
As a real estate investor with experience in helping homeowners facing foreclosure, I am here to offer my assistance. My goal is to help you find the best solution for your unique situation. Whether you’re considering selling your home, negotiating with your lender, or exploring other alternatives, I have the expertise to guide you through the process.
Remember, time is of the essence. The earlier you reach out for help, the more options you may have. Don’t wait until it’s too late. If you’re in Arkansas and facing foreclosure, please reach out to me at as soon as possible. I am committed to helping you find a way out of this challenging situation.