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MAIN Arrow to Home Life Home Life Arrow to Legal Advisor Home Legal Guide Arrow to Foreclosures Foreclosures

In recent years, there has been a 50% rise in the number of homes going into foreclosure.

The reason?

Easy, interest-only 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.

foreclosureJob 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.

Foreclosure stages

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.

However, the 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.

For the best foreclosure deals in less upscale neighborhoods, experts also advise keeping a watch on government auctions sponsored by such agencies as HUD, Fannie Mae, Freddie Mac, or the Veteran's Administration.

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 ....

Picture of foreclosure sign
What to do if you're faced with foreclosure?

First, and foremost - don't panic, say the experts.

Swallow your 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.

Getting in, and out, of foreclosure

After a few months of missed payments, the bank will call in the defaulted loan and begin foreclosure proceedings. If this happens, TALK TO YOUR LENDER and be honest and forthright about your financial situation.

Ask 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 schedule.

Meanwhile, 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 such foreclosure 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?

Foreclosure 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.

Depending 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 ...

also see -> Bankruptcy | Eviction Laws | Mortgage Insurance

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.

How 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.

Foreclosure - Overview of common foreclosure practices in the U.S. with a further explanation of deed in lieu of foreclosure, from Wikipedia.

Buying Foreclosures - A guide to the topic covering where and how to buy a foreclosure, information on related auctions, plus more on how to avoid foreclosure for homeowners.

Foreclosures, Short Sales, Tax Foreclosures, Tax Liens Forums - Join active discussions on repossessions, auctions & foreclosures, short sales, tax lien certificates & related issues.

Foreclosure University - The 10-minute online course to get you up to speed on the foreclosure market with free tutorials, flowcharts & the latest foreclosure news.


The information provided on these pages is intended as reference
only and does not constitute professional legal advice.

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