In recent years, there has been a 50% rise in the number of homes going
payments or adjustable rate mortgages (ARM) made the first years
of home ownership possible for almost anyone. Relaxed credit checks
and income requirements allowed many of the eager buyers to borrow
more than they thought possible. For some new home owners, the
dream house cost more than they really could afford.
Job losses, predatory lenders, high credit card debt, a sluggish real estate outlook, and high heating bills continue to plague consumers as their options dwindle. In the present economy, refinancing or selling a house in a soft market becomes far less viable.
This is when
once-happy homeowners in large numbers begin go into default on
mortgage loans. However, one's misfortune can be another's dream
opportunity, meaning 25% - 50% savings for careful buyers in the
foreclosure investment market.
But be forewarned: foreclosures are not as easy as stepping in and getting a "steal" on a prime property.
Of the three
stages of foreclosure that investors are keenly aware of the
first is known as pre-foreclosure. This
is when owners first begin to default on their mortgage, a listing
of which is usually kept on file at the local town courthouse.
At this point, buyers may
gather up the information and contact owners directly to enter
into negotiations, and perhaps work out a mutually beneficial
deal with the financially-strapped seller.
The second stage is when the owner actually defaults on the mortgage loan and the house goes up for public auction.
former owner is no longer required to disclose any problems, so
the bidder who "wins" the auction may ultimately be
stuck with costly repairs or back taxes that undermine any savings
to be had. The bidding process can be fraught with other surprises,
too, including owners who may arrange refinancing to save their
homes from the auction block at the very last minute. Or winning
bidders who find out too late that some auction houses may require
them to pay up in cash only - within 24 hours - or lose the bid.
Foreclosures - gambling on a great deal
In short, buying foreclosed homes at auction can mean risky business for the novice.
Leaving less to chance, some buyers may go after "orphan" houses that may fail to move at auction altogether. These properties usually revert back to the lender, when it is reclassified as an REO, or real estate owned.
Banks are usually anxious to sell an unoccupied REO for fear it will quickly depreciate, so some lenders may be open to negotiating with an interested buyer willing to pay the auction bid.
Elsewhere on the Web, find out more about the ins and outs of foreclosure buying, where to find the best deals, along with more expert tips and facts you'll need on hand when entering the sometimes risky but often very profitable real estate foreclosure investment market ....
to do if you're faced with foreclosure?
and foremost - don't panic, say the experts.
pride and your emotions, and respond immediately to any threat of foreclosure
from your bank. Also know that, in the U.S., you're not alone as recent headlines
show a startling rise in bank repossessions and foreclosures nationwide as the
economy nosedives in a global credit crunch.
in, and out, of foreclosure
a few months of missed payments, the bank will call in the defaulted loan and
this happens, TALK TO YOUR LENDER and be honest and forthright about your financial
about loan refinancing, or making interest-only payments on the loan. Believe
it or not, many reputable lenders would really rather not repossess or foreclose
on your home. It's usually a money losing proposition for them, so they are happy
to work with you on creative ways to get you back on a regular mortgage payment
watch out for any sharks that may come circling calling themselves foreclosure
"consultants" and offering services (i.e., like talking to your lender)
that you would be better off doing yourself for free. Other
scams include equity skimming in which a "buyer" offers to take
over the deed, leaving unsuspecting homeowners with the defaulted loan.
I'm in foreclosure - now what?
rules vary from state to state, but generally there are two basic procedures -
judicial and non-judicial - by which foreclosure proceedings are carried out.
A judicial foreclosure sale is one that is filed with the court and subject to
court approval. A non-judicial sale is one that is followed according to an already
agreed-upon clause in the deed of trust.
on where you live, you may be given a fighting chance to reclaim your house for
foreclosure under what is commonly called "right of redemption". Alabama
allows up to 12 months to reclaim your property, while Tennessee allows up to
two years, while in a number of other states, there is no right of redemption.
More about foreclosure around the Web:
Elsewhere on the Web, take advantage of a wealth of related information & advice on
foreclosures including expert tips on how to avoid it, stop it, or otherwise arm
you with tools & knowledge you can use in the foreclosure battle ...
Foreclosure Overview - How you can quickly face foreclosure and what
to do about it with tips on budgeting and shopping for the best mortgage rates
plus additional advice on immediate steps to take to halt foreclosure proceedings,
and more on how to spot a foreclosure lending scam.
to Avoid Foreclosure - Online brochure from HUD with general information on the topic for homeowners
with FHA insured loans, although tips & advice apply to homeowners everywhere
within the U.S.