Foreclosure means an individual is losing their home and may not be in a healthy financial situation. A foreclosure occurs when an individual who owns a home is unable to make the monthly required mortgage payments and is evicted from the home by the lender.
The mortgage lender has the authority to evict the homeowner on the basis of the contract signed by the purchaser and the lender at the time the home was purchased. As stated in the contract, the house itself serves as collateral on the loan.
Some lenders may allow a grace period in which a payment can be made prior to a foreclosure. However, this is usually a relatively short period and may only be a couple of months. In general, if the borrower is behind on their payments, it will be difficult to catch up on those payments due to late fees that may be involved.
Foreclosure can be one of the most difficult issues a homeowner may face. One of the most common questions an individual may ask themselves is, how much does a foreclosure cost?
Being unable to keep up with mortgage payments can be extremely difficult for an individual. However, not being aware of the cost of defending against a foreclosure or ensuring the process is done fairly can make the situation much worse.
Depending on the type of foreclosure, a typical amount for foreclosure attorney fees may range from $1,500 to $20,000. It is also important to note that foreclosure laws vary by state. An attorney will be familiar with the local foreclosure laws.
In several states, judicial foreclosure is the primary way of dealing with a home foreclosure. In these states, the lender must go through the courts to show that the borrower is failing to make the monthly mortgage payments. If the foreclosure is approved by the court, the local sheriff will auction the property to the highest bidder in order to repay the debt owed on the home.
Other states use a non-judicial foreclosure process, known as the power of the sale. This process is faster than a judicial foreclosure.
What Factors Cause Foreclosure Costs to Vary?
Foreclosure fees and costs will vary. Attorney’s fees are a factor in the cost of a foreclosure. There are, however, many other considerations that determine how much the foreclosure process will cost. Discussed below is a general outline of the costs usually associated with a foreclosure.
Factors that determine the cost of foreclosure typically include:
- The type of foreclosure;
- Costs from the loan servicer; and
- Attorney’s fees.
The cost of a foreclosure will vary depending on whether the mortgage has recently fallen into default and the homeowners are willing to surrender the property or if the homeowners are going to attempt to reinstate the home loan or otherwise defend against the foreclosure.
It is common for a loan servicer to assess additional charges against a borrower who is in default. Fees related to default may include:
- Property inspection or preservation costs;
- Foreclosure fees and costs, including:
- Filing fees;
- Notice and certified mailing costs;
- Property inspection and preservation costs;
- Potential lender attorney’s fees if a loan is reinstated; and
- Corporate advances.
In general, each party will be responsible for their own attorney’s fees and costs. However, in some instances, the lender may seek to require the borrower to pay for all or a portion of the foreclosure fees. These fees will vary depending on the complexity of the defense required and the length of the foreclosure process.
What Goes into Determining a Lawyer’s Fees?
There are many factors that determine a lawyer’s fees during a foreclosure. The primary factors that can cause the amount to vary include the type of foreclosure defense strategy and the lawyer’s fee structure.
Typically, a foreclosure lawyer will bill using a flat fee or an hourly fee. If an attorney charges a flat fee, it will generally be around $1,000 to $4,000.
There is a common misconception that a lower fee indicates a lower quality of legal representation. However, this is absolutely inaccurate. A lower fee is simply the lawyer’s own assessment of the amount of work they expect to do on the case and their evaluation of the complexity of the case.
Therefore, if a foreclosure is going to be relatively quick and not complex, a lawyer will likely charge a lower flat fee. However, if the borrower continues to live in the home or is otherwise presenting difficult foreclosure defenses, the fee will likely be higher.
Why Would Lawyers Charge an Hourly Fee?
Attorney fees for foreclosure will vary depending on the attorney and the case. Hourly attorney rates will usually vary depending on the skill and time constraints of the attorney. It is reasonable to expect to pay between $100 and $500 an hour for an attorney’s time.
It is important to note that, similar to a lower flat rate, a lower hourly rate does not indicate a lower quality of legal representation. In fact, the exact opposite may be true. A lower hourly rate may be charged because the lawyer knows the case will be lengthy and have several complex defenses.
This may mean the lawyer will have to charge for many hours of work. Therefore, by charging a lower hourly rate, they can ensure the case will be affordable for the client based on how costly the case will be overall.
An attorney who charges an hourly rate may also require the client to pay a retainer fee. A retainer is payment for a set amount of a lawyer’s time. After the retainer amount is consumed, a standard hourly rate will then apply. For example, if an attorney requires a retainer of $3,000 and bills at a rate of $150 an hour, that retainer fee will cover the first 20 hours of the lawyer’s time.
When an attorney bills using an hourly fee structure, it is common for the legal bill to go as high as $10,000 to $15,000 fairly quickly. This type of billing system is the most common when a lawyer has been hired for a complicated foreclosure case. This may involve cases where a complicated defense will be presented or a home is quite valuable and the homeowner does not want to lose it.
Which Fee Structure Is Best?
There is no one fee structure that is best for every client. The best fee structure is the one that suits the individual client’s needs. A lawyer will be understanding of this issue.
It is always important for an individual to learn about that for which they are paying. Having a basic understanding of what a foreclosure should cost is always a great idea prior to an initial consultation with an attorney. This basic understanding will give the client a place to begin their dialogue with their attorney regarding the fee structure and how they will charge.
Do I Need a Foreclosure Lawyer?
Yes, it is extremely important to have the help of an experienced foreclosure lawyer for any foreclosure issues. If you are in a difficult financial situation and you cannot make your monthly mortgage payments, you should seek the help of an attorney immediately.
It is essential to contact your lender as early as possible. This will allow you to plan for possible options to modify your payments instead of having to face the foreclosure process. The foreclosure process can be overwhelming, complicated, and stressful. Having an attorney on your side may be the difference between saving and losing your home.