What to Do When You’re Facing Foreclosure - Tampa Bay Business & Wealth

People at every income level are hurting in today’s economy.

Prices are up, wages are still stagnant, and interest rates are higher than they’ve been in years. Not to mention a weak stock market and increasing layoffs.

In other words, we’re facing bleak economic conditions.

In the first quarter of 2025, U.S. foreclosure activity saw an increase for the first time since the pandemic, with a disclosure for one in every 1,515 homes. The highest foreclosure rates were observed in Delaware, Illinois, and Nevada, and Florida currently ranks seventh with one foreclosure for every 1,059 homes.

While we often associate foreclosure with lower income homeowners, the truth is it happens at every income bracket. Sure, those with fewer assets tend to be more prone to this risk, even those in the top 1% can, and do, face this issue as well.

So no matter our income or wealth, we all need to be prepared because in today’s economy, this can happen to any of us.

So what should you do if you’re facing foreclosure?

Evaluate the situation and create a plan

In a perfect world, you’d never have any financial challenges, but in the real world, people lose their jobs, companies go out of business, and health crises arise when we least expect them. Circumstances are sometimes, unfortunately, out of our control.

That’s why it’s critical that we first ensure we always have an accurate and complete picture of our financial health. It’s easy to get complacent and focus too much on your job, or business, or worse yet, your entertainment. When that happens, if you’re not paying attention to your personal finances, income can decline and expenses can increase, putting you in a position to be blindsided.

So avoiding that is your first priority.

If you do find yourself in a position where you can no longer afford your mortgage, you need to quickly face reality and start planning to resolve the situation.

That might mean selling some assets to make up the difference. You probably don’t need that boat or fancy sports car anymore, for example, and the cash you receive from selling it could provide the financial breathing room you need to get things back on track. It almost certainly means cutting expenses. Eating out is off the table, along with travel, designer clothes, and jewelry. You need to evaluate every asset and expense and determine what to adjust to maintain your mortgage—if that’s even possible at all.

If it’s not, you need to take a different approach.

One tactic here is to restructure your mortgage with your lender. Many lenders offer special programs that essentially refinance your loan, adding your past due balance into the back of the loan and in some cases, even lower your monthly payments.

Another option is to sell your home. You could take the traditional approach here, structure a short sale, or even set up a “Subject To” transaction where you keep the mortgage in your name, but sell the home to a buyer with the intent to refine down the road to eventually finalize the transaction. I covered this process in-depth in my last article here, and it’s something I help people with all over the country every day. And seller financing may be an option as well.

Ultimately, the type of transaction used will depend on a lot of factors, including your financial circumstances, equity, timeline, credit score, and even local market conditions. You should talk to an experienced real estate professional to determine the best path for you, and that may change over time as these factors change.

Take immediate action

Once you’ve determined what you need to do, you need to take immediate action.

Unfortunately, a lot of people go into denial at this point, thinking their situation will suddenly turn around. Other times, they simply refuse to accept reality. Both lead to stalling that can make the problem worse or even take certain options off the table.

So it’s critical to execute on your plan quickly. The faster you address the issue and take meaningful action, the faster you can minimize or eliminate further financial damage, resolve it, and begin rebuilding your life.

Develop a plan for your comeback

We all face setbacks in life.

A foreclosure is just one of many that you may face throughout your life, but it’s also one of the easier ones to overcome and bounce back from, in my opinion.

Let’s get the uncomfortable part out of the way first. Yes, you’ll probably have to downgrade. You’ll probably face embarrassment. You’ll probably even feel like a failure. And all of that is OK. The truth is—some of the most successful people you look up to have lost everything, and some of them have lost everything several times over.

You can recover from a foreclosure too.

The first step is to establish a new primary residence. That might be a smaller home, an apartment, or even a room at a friend or family member’s home. It doesn’t matter what it is—this is just the launchpad for your comeback.

Next, you’ll get your finances back on track. This means maximizing your income, paying off other debts, and restoring your credit score.

That could mean doubling down at an existing job, starting a side hustle, or launching a business. Depending on your circumstances, you may want to leverage a combination of these approaches. Right now, you need to focus on making as much money as possible so that you can pay off your debt, which will help you to undo the damage that’s been done to your credit score while putting you into a stronger financial position. It’s critical to manage your credit with extreme discipline now more than ever.

Once your debt is paid down to less than 5% of your credit limit, you should begin saving and investing again—but not a minute before that. As you begin to build up new assets, you further improve your financial position. Now, with a healthy savings and a strong portfolio of stable assets, you’re finally in a position to begin looking at the kind of home you really want again.

Depending on how badly your credit was damaged, you may not yet be in a position to buy a home through traditional funding, but that doesn’t mean you have to wait.

Remember how I talked about “Subject To” transactions earlier in this article? Well, now you can leverage that same financial strategy on the other side of the equation to purchase a home.

Everyday, millions of Americans all across the country are looking to sell their homes. Some are open to the “Subject To” model because they’re facing circumstances like foreclosure, but many more are open to it for a variety of other reasons. Maybe they don’t have enough equity to sell through traditional means or the asking price doesn’t fit the traditional model. There could be countless other reasons, but the point is that this model may give you the ability to purchase a home despite still having a less than ideal credit profile.

The key is to work with a real estate professional who is experienced in this type of transaction, because frankly, most simply don’t understand it well enough to do it properly. When you work with someone who does, though, the process will be smooth—often easier than traditional funding.