Why Do Homes Go Into Foreclosure?
Here at Investors At Auction, we are around foreclosures all of the time. While foreclosure is never a situation that we want to see people in, we also understand that the foreclosure process is simply a part of the real estate market that is forever ingrained in the system. While most of our blogs center around helping or customers make the most out of the foreclosure auction process, in today’s post, we wanted to talk about something a little different. Today, we are going to be focussing on some of the most common reasons that people have to declare foreclosure. We hope that by the end of this blog you feel more educated on foreclosures as a whole and can utilize that knowledge to your advantage.
Foreclosures Happen for a Multitude of Reasons
Negative equity is considered to be the leading cause of home foreclosures in the United States. Negative equity occurs when a person owes more on their home loan than their home is actually worth. This is a bad situation to be in because it severely limits the financial options of an individual. When a homeowner has equity in their home, they are able to refinance or sell the home if they run into financial trouble. Without this luxury, foreclosure is often the only way out for homeowners who find themselves in financial trouble. The leading cause of negative equity is a decline in home prices brought about by an economic downturn. However, there are other factors that can cause a home to be foreclosed other than negative equity. Below, we have listed some common reasons for foreclosure.
- Death in the Family: In some cases, foreclosure happens because of a death in a household. This most commonly results in foreclosure when the person who dies is the main financial provider within the household. With their income gone, the other residents of the home are unable to afford to pay their mortgage payments, resulting in foreclosure.
- Divorce: Another common reason that homes go into foreclosure is divorce. The divorce process can be long and arduous and occasionally people can run into financial issues unexpectedly. Between court costs, lawyer fees, and any money that must be paid as part of the divorce agreement, many people find that they simply cannot keep up with their mortgage payments. Commonly, however, foreclosure comes about as a result of one spouse refusing to leave and one spouse refusing to pay the mortgage.
- Illness: Sudden, serious illnesses, chronic diseases, and injuries are also a leading contributor to the foreclosure of a home. Individuals suffering from chronic illnesses are often unable to work steadily, reducing the amount of income that they have to work with. In addition to chronic diseases, sudden medical costs can be very detrimental to people if they do not have health insurance. A single medical emergency can put a person in thousands of dollars of debt, leaving them unable to properly pay for their home.
- Denial: The last cause of foreclosure isn’t so much something that can be measured, but more, something that is a part of human nature. For many people, their home is their castle. Their home is the one place where they can truly relax, have control over their environment, and feel content. For many people, the thought of losing this sanctuary is a little more than they can handle, so they will deny to everyone around them, including themselves, that there is any sort of issue. Unfortunately, denying that there is an issue does not make said issue go away.
We hope that this short blog has given you a better understanding of some of the underlying reasons that factored into the foreclosure of a home. While foreclosures are a sad thing in a lot of cases, they are also an opportunity for others to purchase a property at competitive rates. Here at Investors At Auction, we make it our mission to help as many people as possible navigate the cumbersome waters of the foreclosure auction process, helping them make a smart purchase at a fair price. If you would like to learn more about our services or if you would like to schedule an appointment with one of our foreclosure auction specialists, please contact us today or visit our website.