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As a Realtor, it's amazing to me what lengths people are going to in order to buy a house! Many of these people are dealing with 'predatory lenders', who prey on people with bad credit, including past foreclosures, and write home loans for people who really can't afford them. While I was describing one person who stood out in my memory as someone who bought a home that she couldn't afford to an attorney friend of mine who specializes in Bankruptcy and Foreclosure help told me 'In five years, she will be MY client.' My response was 'Alan, not FIVE years - ONE year!'
Foreclosure is a process, highly regulated by state law, in which the lender tries to recoup the amount owed on a defaulted loan by either selling or taking ownership of the property. The foreclosure process begins when a borrower/owner doesn't make their mortgage payments, and the lender files a public default notice. The foreclosure process can end one of four ways:
1. The borrower/owner pays off the default amount to reinstate the loan during a grace period determined by state laws. This grace period is also known as pre-foreclosure, and can be as much as six months. The mortgage loan is reinstated, as if nothing ever happened. Happy ending for the homeowner!
2. The borrower/owner sells the property to a third party, either before or during pre-foreclosure. The sale allows the borrower/owner to pay off the loan. This is not as happy an ending for the homeowner, but avoids the consequence of having a foreclosure on the homeowner's credit history. A smart homeowner who realizes that making the payments is becoming problematic will choose this course of action before things progress to the next level.
3. If the homeowner cannot catch the payment up to make them current and either cannot or will not sell the home, the lender will usually schedule an auction. A third party may buy the property at a public auction at the end of pre-foreclosure.
4. If the auction does not bring about a sale of the property, the lender will take ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These are also known as bank-owned properties, and are sometimes listed with Realtors.
Unfortunate as the reality of foreclosure is to the person who is losing their home, this turn of events creates opportunities for the investor. The steps in the foreclosure process vary from state to state, but can generally be described as:
1. Pre-Foreclosure
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property. This starts with a 'Notice of Default' and, if the homeowner cannot correct the situation, continues with the filing of a 'Lis Pendens', or a notice of pending action. This requires that the investor make contact with the distressed homeowner, negotiate with the homeowner, who is usually in some kind of crisis, and reach an agreement to purchase. Good 'people skills' are of the utmost importance. When an investor buys the home during this period, the borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of approximately 30 percent below market value.
2. Auction
If the loan is not reinstated by the end of the pre-foreclosure period, a 'Notice of Foreclosure' is issued by the lender to the homeowner. Lenders do not want to be in the Real Estate business, and will often enlist the aid of an auctioneer to sell the property prior to taking ownership. Potential investors can bid on the property at a public auction. If you are buying, be aware that you are often required to pay in cash at the auction and you may not have much time to research the title and condition of the property beforehand. However, a public auction often offers some of the best bargains and avoids the stress and unpredictability of dealing directly with the borrower/owner, who can decide to change their minds at the last minute and break the agreement you reached with them.
3. Bank-owned
If all else fails and the lender winds up taking ownership of the property, either through an agreement with the owner, during pre-foreclosure, or at the public auction, the lender will usually want to quickly re-sell the property to recoup the amount of their unpaid loan. The lender will probably make sure the title is clear for any buyer, but the potential bargain is typically less than a pre-foreclosure or auction property.
If you are looking for foreclosure properties to buy, the place to start is in the 'Legal Notices' section of your newspaper. You will find the notices of pending action, and can contact the homeowners before they get further into the quicksand of the legal process. Networking and making contacts with attorneys and lenders is also a way to find properties. Most of these people are good people who have had some tough breaks and need a fresh start. There are also web sites that feature foreclosure properties for sale. These sites can be a great resource if you are buying statewide or nationwide, rather than in one city or county.
For more information, please visit the link below!
http://www.ezniche.com/data/article.php?l=168 |
| Author: Dottye Blake |
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Author Bio:
Dottye is a Realtor in Central Florida, and a wife, mother and grandmother. She is the published author of a book and several short stories, songs, articles and poems. Click Here for a Better Body! |
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