How to Stop a Land Auction

When a piece of land is being offered up at public auction, it is good news for the bidders but often bad news for the previous land owners. A piece of land is seized for auction once it has been foreclosed upon by a bank or other creditor, usually as the result of accrued mortgage debt. Although seeing your land go to auction may seem like a hopeless situation, there are several ways that it can be prevented.

• 1

  Engage in short paying or short refinancing your property. This involves negotiating with your creditor for the reduction of your mortgage loan, hence the term "short." Your old mortgage agreement is voided, and a new loan is drafted that is usually much less than your original rate. Depending on your circumstances, the difference between the two amounts is forgiven by the creditor or paid by an investor or relative.

• 2

  Modify your existing mortgage or establish a payment plan. Modification of mortgage terms requires mutual agreement between you and your creditor. It involves temporary changes to the original terms including reduction of interest rate, payment in principal portions or extending the amortization -- decreased payment schedule -- to reduce your overall financial hardship. Establishing a repayment plan is similar in that it allows a reduction in your mortgage payments over time, provided the creditor agrees to your desired terms.

• 3

  Establish a full-payoff refinancing of your land's mortgage. This entails taking out a new mortgage loan that will be used to pay off your remaining debt and the associated legal fees. High equity can allow you to be approved for a new loan despite your mortgage debt.

• 4

  Arrange for short sale, friendly foreclosure or a repurchase of your land after auction. In a short sale, your land is sold to a third party. The amount paid by the third party serves to settle your mortgage debt, and you are free to negotiate repurchasing terms with that party. If your land is sold back to you, it is deemed a friendly foreclosure (or friendly auction). Repurchasing of your land after auction requires that you arrange a deal with the winning bidder.

• 5

  Discuss the possibilities of forbearance. If you have a valid reason for why you have not been making regular payments on your land's mortgage, your creditor may offer you a forebearance agreement. In cases of severe or unique personal, physical or financial hardship, a break in payments or a reduction in debt amount may be granted to you. In some cases a creditor may require a temporary repayment plan to be established.