What is the Foreclosure Process in Tennessee?
The foreclosure process in Tennessee is a legal process where the mortgage bank or lender forces a public sale of a property to satisfy the underlying loan when the homeowner defaults on their obligation. The foreclosure process is a heart-wrenching series of events that causes the homeowner, who has missed several mortgage payments, to give up their home or settle with the bank. The bank really doesn’t want to go through the foreclosure process to recoup the unpaid debt unless there is no other recourse.
Let’s fully examine the foreclosure process in Tennessee because so many people do not understand or know how foreclosure works. If you find yourself behind in payments and know foreclosure may be looming in the distance, you need to know what to expect next and your options.
You Are Behind in Your Payments, Now What?
Everyone knows that foreclosure is a nasty process. This is how the foreclosure process in Tennessee begins. The homeowner is two, three, or four months behind in their payments and probably has little to no chance of repaying the missed payments, penalties, and fees back to the bank. The homeowner is in default of their obligation (preforeclosure) to the mortgage lender, and the lender has no recourse but to begin the foreclosure process.
Foreclosure Can Happen to Almost Anyone
Why do people go into foreclosure when their home has become their heart and soul? Life is full of surprises and changes. Some changes are more than many people can bear and they lose everything they own.
There are many circumstances that cause people to go into foreclosure. Some of the major calamities in life forcing foreclosure are loss of job or job reduction, illness, death of a spouse, financial distress, IRS troubles, bankruptcy, and newer issues are drugs and prison.
Divorce is common and occasionally leads to residing spouse to sell the home. More than 50% of marriages will end in divorce, but most of these homeowners settle their affairs early. Most divorcees sell their homes before they are forced into foreclosure.
Title Theory State vs Judicial Foreclosure
Foreclosures are treated differently around the country. Tennessee is a title theory state meaning the property title remains in trust and the deed of trust is the document that secures the title. The lender takes the title of a property as a security instrument and held until the mortgage is paid back in full to the lender.
In some states other than Tennessee, a judicial foreclosure requires the mortgage lender to pursue foreclosure by filing a formal written notice “lis pendens” to the court to begin the foreclosure process.
Tennessee Is a Non-Judicial Foreclosure State
Tennessee is different than many other states concerning foreclosure. Tennessee is a non-judicial foreclosure that does not require court action. The state requires public notices posted in a given time frame announcing a power of sale clause due to the default of the homeowner. A third-party attorney is hired by the mortgage company to start the process of “power of sale” foreclosure. However, a lender can still choose to foreclose by action in a judicial foreclosure where the court issues a final judgment of foreclosure.
The two main attorneys handling foreclosures in Tennessee are Wilson and Associates and Rubin Lublin, LLC, both are in Memphis.
Public Foreclosure Announcements
The foreclosure process in Tennessee begins once the homeowner is behind 4 months in payments. The trustee of the deed of title or attorney is hired by the lender to notify the homeowner with a Notice of Trustee Sale they are being foreclosed upon and the public courthouse sale date is announced. Timing is critical and enforced by law.
A minimum of 20-day notice is required for the homeowner to be “served” made aware his/her property will be sold at public auction on a given date. The served notice is a foreclosure notice of default and the notice is placed on a window or front door of the home. A newspaper that is distributed countywide will give notice of the impending foreclosure sale at least 3 weeks prior to the auction.
Yes, you read that correctly and I have seen this happen. The house was posted in a newspaper before the owner was notified of the pending auction date. Trust me, this is not a fun way of finding out your house will be sold in 4 or 6 weeks.
Foreclosure Auction Sale on the Courthouse Steps
In some Tennessee counties, the Sheriff’s department resides over the auction. Larger counties like Davidson, Rutherford, or Williamson, the actual sale can also be handled by a third-party company like the national company Auction.com.
Foreclosures are Expensive
Foreclosures are expensive. Because the lenders rather not spend $3,000 to $5,000 for the foreclosure process, they are willing to work with homeowners to some extent. If the homeowner can make all delinquent payments, other fees, penalties, and legal fees, then the foreclosure can be stopped.
All of these fees and payments must be brought up to date for the lender to reinstate the loan and proceed with regular payments. If you try to make a back payment and the bank refuses it, then chances are the foreclosure process has begun. At this point, you must make in one lump sum all late payments, plus fees, penalties, and attorney fees to stop the foreclosure process in Middle Tennessee.
Foreclosed Home is Sold: You Profit or You Owe (Short Sale)
These are some things to consider if you do lose your home to foreclosure. If the home sales for more than what is owed to the bank plus fees, penalties, etc., you will receive the difference. On the other hand, if the property is sold at a loss, you still owe the bank the difference in the amount the bank receives and what you owe on the mortgage. This debt will follow you until you can finalize it with the bank.
Foreclosure and Your Credit Score
Just how bad can your credit score be squashed with a foreclosure? On credit scores of around 680, the foreclosure can drop your credit rating 85 to 100 points. If your credit score is higher, like 780 or more (excellent) you are looking at 140 to 160 points reduction. Your credit rating will take a long time to recover, maybe a couple of years. Be that as it may, the minimum seasoning period, or wait time, following a foreclosure is 3 years. This can be shortened if you can show to the Federal Housing Administration (FHA) your foreclosure was caused by an uncontrollable, one-time incident.
What Property Can You Keep in a Foreclosure?
Your home is being foreclosed upon. What can you legally take from the home? Your personal items including furniture, computers, televisions, refrigerators, washer, and dryer, etc., are yours and the bank doesn’t want them. What the bank expects to remain with the house are the cabinets, floors, light fixtures, ceiling fans, dishwashers, garbage disposals, air conditioning systems, all plumbing fixtures and lines, garage door openers, and alarm systems.
Timetable for The Foreclosure Process in Tennessee
- One payment is missed, 30 days, the bank will usually call and inquire if all previous payments have been on time.
- 90+ days past due Notice of Default is sent by certified mail to the homeowner
- 120 days (4 months) bank files foreclosure process – Notice of Trustee Sale
- 1 to 2 months home is publicly auctioned on the courthouse steps
Right of Redemption
Once the foreclosure is completed, the foreclosed homeowner possibly can return up to 2 years after the foreclosure and reclaim the property. The homeowner must pay the new owner the original balance of the unpaid loan plus all costs accumulated. However, if the original loan documents or deed of trust at closing have waived the redemption, then redemption is not possible.
How to Stop a Foreclosure
As you have seen, the foreclosure process in Tennessee is long and complicated. You can stop a foreclosure and save your home if you:
- Ask your lender for forbearance (loan payments are postponed a month or two or reduced but the interest continues to accumulate).
- Bring a lawsuit against the foreclosure.
- Pay all late payments, penalties, fees, attorney fees, and ask to reinstate the loan.
- Refinance if possible.
- Sell your house on the open market (might take longer than you have) or sell to a real estate investor who can close quickly. 6) File for bankruptcy.
Sell My House Now
The most common way out of foreclosure for many people is to sell my house now. Many people just don’t have the means if they are already having financial issues to payback late payments, penalties, fees, and attorney fees as a lump sum to reinstate the loan. Forbearance of the loan for a couple of months is probably not the answer either. Time is against homeowners as the foreclosure process has a set timetable whose clock keeps ticking. You can still stop foreclosure at the last minute by selling to a cash buyer.
The Real Estate Agent
Sell my home in Smyrna or Murfreesboro on the open market is one way you can choose to stop the foreclosure process. Getting rid of the home brings relief from stress and worry about losing the home. A home needing basic repairs and maintenance needs to be completed before listing it for sale. If the home needs a lot of repairs, and the homeowner does not have the funds nor time to complete, then selling the home in an “as-is” condition be the only way to sell it. Hiring a professional real estate agent is a better choice versus trying to sell the home by oneself. Even with an agent, the home will take 40 to 60 days at best to get under contract and close. Depending on the town and neighborhood, the home may even take 3 to 5 months before it is sold and that is too long to fit into the foreclosure process. To read more about the many costs associated with selling a home on the open market see “5 Reasons Why It Pays to Avoid Using the MLS When Selling Your House.”
Sell My House Without an Agent
You may be thinking you rather sell my house without an agent, or FSBO, for sale by owner. Yes, you will save thousands of dollars in commissions, but you will have to do everything. This may be the most difficult choice because you will need to know how to find buyers, get them to your doorsteps and have all the necessary documents to close quickly.
Many home sellers use Craigslist and Facebook in addition to a sign in the yard. Don’t forget to prescreen every visitor to make sure they are financially qualified to see your house and safe to show. So, hide your valuables, keep the house tidy, and be ready for phone calls days, nights, and weekends. I am currently trying to reach a For Sale by Owner to purchase their townhome. I have called several times, left voice messages, knocked on the door, left my card on the door and still no response 2 weeks later. The sign is still in the front yard.
Sell My House to an Investor
Another way of selling your home in default (preforeclosure) or in the foreclosure process in Tennessee is to sell my house to an investor. A local real estate investor with cash can stop the foreclosure and close quickly.
You can sell my house as is condition to local professional real estate investors. Real estate investors are in the business of buying homes and fixing them up to be resold. Sometimes homeowners just want someone to take over house payments and many investors will do just that. Typically, investors are ready to pay cash for your home, can close quickly, and pay all of your closing costs.
This is a huge advantage to you as your home is sold quickly and the burden of default is over. Additionally, the investor helps your credit score because the default is removed including all back payments, penalties, fees and maybe attorney fees. The investor who pays your monthly mortgage actually improves your credit rating faster. The back payments are brought up to date. Because the ongoing payments are made by the investor in a timely manner, your credit score improves monthly. Investors cannot afford to make a late payment or miss a payment. Their own credit rating and reputation are on the line.
Real Estate Investors Benefit Middle Tennessee Neighborhoods
Real estate investors add a lot of benefits to towns and neighborhoods whether it is Smyrna or Clarksville. Often the house that is in default or foreclosure shows the signs of distress of the owner. Usually, the distressed homes are the worse looking homes in the neighborhood. Maintenance is behind in schedule and repairs have been put on hold for weeks, months, or even years. When the house is sold to an investor, their investment must be cleaned, updated and made into a show house so it can be sold quickly. A renovated home often brings improved value with higher selling prices to surrounding neighbors and the neighborhood. This makes selling other homes there easier, for more money, and homeowners have more appreciation and pride for their newly beautified street.
We at Southern Homes Investments Nashville TN Can Help You
If you are facing financial stress in your home because you are late on your mortgage payment, give us a call. We help people who are struggling with debt, illness, IRS pressure, loss of job or job relocation, death in your family or illness. Even if you are only one mortgage payment behind, you may be on course to foreclosure. We know the foreclosure process in Tennessee and we can stop foreclosure now. You can sell your house as is to us so you won’t have to worry about any repairs. We buy houses in Nashville fast. We know foreclosure is a scary time, let us help you.
Every day counts. Everyday interest, penalties, and fees multiple. Don’t wait until you get the Notice of Default letter. We would like to talk to you and hear about your situation. Our phone number is 615-235-0612. We can walk through with you the foreclosure process in Tennessee and offer recommendations and solutions. Please do check us out on our website, www.southernhomesinvestments.com. We buy houses for cash fast in Middle Tennessee. Whether you need to sell my house in Nashville, Columbia, Clarksville, Springfield, Smyrna, Murfreesboro or Hermitage, we are ready to help.
Disclaimer: David Wright is a licensed real estate agent in Tennessee, and this article is not a solicitation to list your house.