Best Time to Buy Foreclosures

So summer is behind you and all those crazy investors bought the homes they wanted and what you wanted but ended up being left puzzled as why you didn't come out with a home, right? Well good news - winter time is probably the best time to buy a home as first time home buyers will face little competition from just about everyone. Yes you'll see less terrific real estate homes, the gloomy weather is a turnoff but from experience winter has been good for me and my buyers finding the home they want with almost no other investors or home buyers bidding on the same home. Good Luck!

Real Estate Foreclosure: The Big Picture

For those who are unsure by the notion of investing or obtaining foreclosures for profit or simply to have a roof over your head, well don't be. Here's why.

You can easily break down the process of foreclosures into three primary stages. Ready?

The first stage is pre-foreclosure the second stage is foreclosure auction and the third and final stage is bank owned foreclosures or real estate owned properties as they're interchangeably called.

Traditionally speaking as you move along the timeline of the foreclosure process your potential for profit will decrease the later you get to the foreclosure a property. In other words there is probably much greater profit potential if you are able to identify a property right before it enters into the initial stages of foreclosure in a market that you are familiar with as opposed to calling up the bank for real estate owned properties.

Now let me shed light on one thing, this doesn't mean that one way of doing things is better than another. It's actually a bit more complicated than that. It depends on what you're looking for when all is said and done. If you're planning on making a full-time living eventually from real estate investment then you'll definitely want to learn in baby steps how to get the most out of your time and efforts.

With that said for those who are eager enough to do this full time you will want to learn how to find pre-foreclosures because they generally offer you the maximum leverage and profitability relative to the most deep marked down properties available via bank owned properties

However if you are simply looking for a deep discount at home without wanting to start an entire business involving marketing, distribution, and promoting yourself while driving around neighborhoods every day looking up MLS listings conducting market research and paying all all the costs overlays involved in running a business, then it is unquestionably advisable if you are looking to simply purchase a more inexpensive home to come to call up the bank for a foreclosure property.

The Most Critical Aspect Of The Short Sale

Good news. As a real estate investor, you’ve found a home in pre-foreclosure. You know the owner has missed three mortgage payments, and he now owes the bank more than he can sell his home for.

With the bank poised to begin the foreclosure process, you’re ready to step in and begin negotiating a short sale. You’re ready to convince the bank to take less on the property than is owed in order to save the homeowner’s credit, save the bank time and money in lawyer’s fees and court costs and buy yourself a property at a great price.

But before you can begin the negotiation process with the bank, you must first take the most crucial step in the short sale process. Unless you do this, any fee you negotiate with the bank is irrelevant. Do you know what I’m talking about? If not, you better keep reading.

The one step you never want to overlook is getting the property under contract with the seller.

You could do everything else right. You could determine that the house is worth the remainder of the mortgage: $85,000. Only it needs $15,000 in repairs to get it’s real value to $85,000. And you have estimates from reputable contractors to prove that the purchase price of $50,000 is indeed the as is value. (Don’t forget to leave room for your profit!)

You have done your homework so well that the bank wants to take the $50,000 and avoid the year and a half foreclosure process and expense. Now this property is on the verge of becoming yours at an amazing price.

If, however, the owner hasn’t signed a contract giving you permission to negotiate the short sale with the bank, you have no authority whatsoever. Although the owner is not current on his payments, he is still the owner of the property. As the owner, he has to authorize you to make the sale.

So how do you get the owner to sign a contract?

Simply approach him with the same numbers you would take to the bank. Show him how selling the property for less than its worth will benefit him. Show him how it will keep a foreclosure off his credit report as well as prevent him from owing back payments, legal fees, interest and penalties.

When he agrees to your deal, get him to sign a contract authorizing you to buy the property by way of a short sale. Then–and only then–do you approach the bank with your negotiation tactics.

Keep in mind that vacant houses in pre-foreclosure are tougher to deal with. Because you have to track down the owner. He may be living with a sister, a friend, a parent or any number of other options that are not easy to track.

Just remember that taking the time and making the effort to get a signed contract are well worth it. For that contract with the owner is the most critical aspect of a short sale.

Negotiating A Short Sale – The High Road To Huge Foreclosure Profits

Buying foreclosures can be extremely profitable for real estate investors. However, most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!

Most investors will walk away from these deals because they see no obvious profit. However, you can “create” your own equity by negotiating a “Short Sale” with the bank or lender.

What is a Short Sale?

The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy - buy the foreclosure from the bank at a big discount, sell the real estate, and make money!

How to Negotiate the Short Sale with the Mortgage Holder

Once you have your secured a contract with the homeowner and have your paperwork in order, you'll be ready to deal with the loss mitigation department of the bank. Short Sales success relies on dealing with the loss mitigation department at the bank. Although most lenders look at short sales as a necessary evil within the lending industry, that doesn't mean that the bank will just roll over and do your bidding.

Understand the Bank's Perspective

With foreclosures at a 52-year high, the loss mitigation department at the bank is busy, if not highly overworked. Turn this disadvantage into an advantage - sell them the benefits of your short sale.

Short sales contracts help lenders unload unwanted property and spare many expenses associated with the foreclosure process. These expenses include, but are not limited to, court costs, bankruptcies, repairs and marketing. This is in addition to the $300,000 to $800,000 (or more!) normally held in reserve by lenders. Federal regulations require this reserve, which is usually many times over the actual price of the bad debt.

As the investor, keep these benefits at the top of your mind. After all, it's up to you to convince the lender that cutting their losses short is the best option.

It's time to hone your negotiating skills. Here are 3 Steps to help you out.

Step 1: Have Your Paperwork Ready

There is paperwork that all lenders will require in order for you to submit your offer for the short sale. Second, many of the larger institutional lenders have their own short sale package (their own forms to be filled out and signed).

Since many of these forms have to be signed by the homeowner(s), it's best to have them with you when you meet with the homeowner to work out a deal. At a minimum you should have the homeowner fill out and/or sign:

· Authorization to Release Information (homeowner's permission for the bank to speak to you)
· Purchase and Sale Agreement
· Hardship letter (showing why the homeowner can't make the mortgage payments)
· Financial statement (showing the assets, liabilities, incomes & expenses)
· Estimated HUD1 or Net sheet (showing the bank what they will get)

Second, find out if the lender has a package they want completed. You can do this usually by calling the lender and asking them to fax you the package. Get the lender information from the homeowner in a phone call, so you can get the package before you go out to the house.

Step 2: Approaching the Loss Mitigation Department:

One of the first challenges you'll face with the bank is getting your call to the right person. Some banks have systems set up in a way that when you call put in the homeowner's account number, the call transfers to the appropriate department.

If the bank doesn't have a system like this, call around to find the Loss Mitigation Department. Many banks have different names for this department, so you may spend some time getting bounced around. Other names to try out are “foreclosures department”, “short sale” department, or “loan modification” departments.

Make sure you introduce yourself and be nice, polite, and patient when you reach the right person. This is the person that can make or break your deal. It's helpful to have some form of a script in front of you to get the conversation.

When you speak with them, make sure you cover the following:

· Introduce yourself.
· Name the homeowner, the account number, and the fact that you represent them.
· Ask for the fax number.
· Let them know you're faxing over an “authorization to release information” so that the loss mitigator can talk to you.
· Stay on the phone as you fax this information.
· Explain to them that you're interested in a short sale.

Once they have the paperwork in front of them, the negotiations begin.

Step 3: Begin Your Negotiations

Every bank has its own personality and approach when it comes to short sales. Some teach their employees to at least show resistance up front. One reason for this is that many investors call them expressing interest in a short sale, with no clue how to do it! These loss mitigators usually have about 80 to 300 files on their desk. They just don't have the time or desire to teach you! Let them know you don't need them to!

Many new investors have been advised to not reveal that they intend to invest in a property. However, it is better to be upfront and let them know that you are an investor, and you are buying the property.

Being honest and upfront allows both parties know what is required of them, and what needs to be negotiated.

While speaking with a loss mitigator, make sure to emphasize the following points:

1. You're an investor and you know what you're doing. Although you do want to make profit, let them know you're not out to steal the property from them.

2. You understand that they are busy and appreciate the valuable time they are spending to negotiate with you. Find out what will make it easier on them.

3. Remember your selling points. The bank wants to avoid the homeowner filing bankrupty, and the bank needs to unload unwanted property without taking a huge loss. (And yes, while you are in it to make a profit, you're not trying to rip them off! You're just trying to use your expertise to do what you're good at.)

4. A short-sale is a win-win situation for everyone!


Once you have spoken to the loss mitigation department and given them your paperwork, the lender will need information about the property, the borrower and the deal that you are proposing. If the person you are speaking with tries to test your resistance, make sure you answer as many questions as thoroughly as possible to let them know you are a professional. Hang in there, answer and ask as many questions as possible, and they'll be more apt help you out along the way and walk you through what it is that you need to do.

The most important fact that the broker needs to know is: How much is the property worth? Banks usually hire a real estate broker or appraiser to evaluate the property. This is called a broker's price opinion or “BPO”. The BPO is one of the largest hurdles you need to clear when perfecting your short sale negotiations. In the next article, you'll learn the in's and out's of the BPO and how to negotiate the BPO down to create profit for your short sale.


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Foreclosure – Can Foreclosures be stopped

It is everyone’s dream to own a home or built a house for his or herself. There are a few who are fortunate enough to secure one paid in full while many others try to buy one through financing or securing loans.

However, even you are religiously saving for the so-called rainy days and even if you have sufficient finances, there would come a time that you would find it difficult to face up to your obligations. Sicknesses in the family, a possible retrenchment at work or emergency purchases are unexpected instances where you could find yourself in arrears with your payment and then suddenly you are now facing foreclosures.

When legalities come into play in your financial situations or mortgages, it means that your predicament is deep serious. Foreclosures are one of those legal terms that everyone detests, especially the homeowners and the financers or banks themselves.

In exchange for lending the money, the lender would hold a lien against the property, If the borrower does not make the required payments, then the loan goes into default and the lender could exercise the lien against the property, in order to take legal possession of the property for the purpose of selling the property to pay off the borrower’s loan. This process is called foreclosure.

CAN FORECLOSURES BE STOPPED
HOW TO STOP FORECLOSURES

Aside from the obvious reason of not paying their loans on time, homeowners get into foreclosures, even if they have avenues to explore, simply by ignoring calls or letters from their banks and lenders or just simply giving up on his/her property in the hope that the tide of things would turn favorable on them.

Although foreclosures are eventualities in securing homes through financing, it does not mean that this could not be stopped or remedied. The matter hinges on the homeowners themselves if they want to keep the property for sentimental reasons or just simply foreclose it and just face the consequences of their action, notably severe damage to one’s credit rating.

If you are delayed in payments to your mortgages and there is no relief in sight, in the immediate or near future, then you have to put the problem in perspective and make a contingency plan or efforts.

The standard measure of keeping or selling the property is that if your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of your gross monthly income, consider selling or transferring the property to avoid negative impacts on your credit. This option would more likely be the path to be taken by borrowers who have equity in the property. By selling the property, the borrower could then pay off the mortgage, and pocket the difference if there is equity remaining.

If the financial setback is temporary and you need immediate money to make your loan current so that you could continue paying your debts, it is best to approach family and friends instead of hard money loans since they would lend money based on equity in the property. Just make sure to pay off your loans to your relatives or close friends for it is much difficult to have them foreclose on you to get their money back.

The best and simple solution to foreclosure proceedings is to deal directly with the situation. Be brave enough to talk with your banks or lenders and explain your situation. Remember, they do not want to foreclose on you they just simply want their money back plus interest. By exploring this angle, the lender and the borrower may arrive at a common ground to work on and resolve the situation in a way that is agreeable to both parties. The Loss Mitigation Department would deal on cases like this.

Basic lending guidelines would require all home loans would total up to less than 70% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinancing deals or second trust deed to bring your loan current. Expect higher interest rates and loan fees.

There are several other alternatives available to you depending on the situations of the borrower, laws of the state and policies of the lender. You may consider forbearance, refinancing, modification, deferral of principal, a temporary indulgence and a Chapter 13 Bankruptcy.

In applying forbearance, your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender that there is a temporary problem and it would be resolved in the near future and show that you would be able to meet the requirements of the new payment plan.

A similar portion is deferral of principal in which the borrower agrees to pay the interest only for a certain period of time and then making the usual monthly payments. But just like in forbearance, this is very difficult to obtain unless the bank is familiar with the borrower or the borrower has an excellent credit stature in the bank.

If you have recovered from a financial problem you may able to apply for a mortgage modification. This process involves renegotiating the terms of debt and/or extends the term of your mortgage loans, changing the interest rates or additional surcharges to the principal with the current lender. This may help you catch up by reducing the monthly payments to a more affordable level. Refinancing, on the other hand, means that the borrower obtains a new mortgage with a different lender; the operative word here is different. As much as possible this alternative should be avoided since it would make your problems worse for borrowers in distress would tend to agree to onerous terms just to get a lease on their loans.

A chapter 13 Bankruptcy could be another option for it gives the borrower the time to “re-organize” his finances and work out a payment plan prior to resumption of payment. This would help keep the property and not blemish your credit rating compared to a Chapter 7 Bankruptcy, which completely discharges any debt the borrower had accumulated under the mortgage.

As a last resort, you may able to voluntarily “give back” your property to the lender or a “deed in lieu of foreclosure.” This would not save your house, but it is not as damaging to your credit rating as a foreclosure. This may be availed of if the borrower is in default and do not qualify for any other options and your attempts at selling the house before foreclosures were unsuccessful.

In some other states, there are laws and other options that are available to borrowers with mortgage problems. There is the option of reinstatement which means that the borrower brings the foreclosed mortgage current, including all overdue amounts, as well as fees and costs. Likewise, there is the co-called redemption, however it is usually limited in how often he or she could take advantage of this option and this is limited to some states.

A foreclosure procedure takes a long time to materialize and homeowners are given the chance to bail themselves out of their predicament. Sometimes the best defense against foreclosure is just to make a response on their inquiries or demand letters. Ultimately, the only thing that would stop foreclosure proceedings is repayment of the debt, for every option mentioned here is just a delay in the proceedings.

For More Specific General explanation of Foreclosure procedure in your state.

Five Mistakes To Avoid When Making A Short Sale

The first mistake investors make when approaching a short sale is so prevalent that it deserves its own separate article.

What is this mistaken belief?

Bogus Belief #1: Short sales are quick and easy.

This belief is bogus because banks have a tedious process they have to go through in order to agree to a short sale. They also have to explain the huge loss on the deal to their shareholders, and they have a lot less interest in seeing the deal move quickly than either you or your seller. Short sales thus take an unusually long period of time to complete.

To avoid making the mistake of believing that short sales are quick and easy, you need to understand the process and plan your timetable accordingly.

Once you have the property under contract and go to the lender to negotiate a short payoff, a number of things have to happen. First, the lender will order an appraisal or Broker’s Price Opinion (BPO). The BPO is an informal appraisal done by a local real estate agent to give the lender some idea of what the actual value of the property is right now.

The lender will also ask for a hardship letter from the seller in addition to financial information (bank statements, tax returns and more) to prove to them that the seller really can’t pay. This step alone can take four to six weeks, and only after this step is completed will the lender start the process of negotiating with you.

Every offer and counteroffer has to be ground through the gears of the lender’s particular approval process. This means that every time you want to counter price or terms you can expect to wait a much longer period of time than if you were dealing only with a seller to get an answer.

And the secret reason short sales take an unusually long period of time to complete: loss mitigation officers are notorious for not returning calls or waiting for YOU to call THEM, even when they have the information you’ve been waiting for.

So even though you might only spend 10 hours of actual time on the deal, it can easily be two to three months before you’re able to get an acceptance of a deal with the bank. That’s why you should never put a firm closing date into a purchase contract where you’re going to be negotiating a short sale. Instead, write that you will close “30 days after acceptance of purchase price by lender.” Otherwise, your contract will expire a long time before the deal is finished.

But a second bogus belief also deserves its own separate article to explain.

Bogus Belief #2: Banks Lose Money on Short Sales.

In reality, banks lose MORE money by NOT letting investors buy the property before the foreclosure sale.

For example, the typical property that I buy needs an average of $15,000 of work to be worth its after-repaired value of about $100,000. Often, this property will be subject to a mortgage of $95,000, and the seller is usually two to three months behind in payments by the time he calls me. I will offer somewhere in the vicinity of $50,000 for this property, which means that the bank will “lose” $45,000 by taking my offer.

But if the bank decides to reject my offer and take the property to foreclosure, the bank then pays an attorney to file the paperwork, make the court appearances, search the title, notify the other lien holders of the foreclosure, go BACK to court when the borrower declares bankruptcy at the last minute, etc. Total legal fees: $5,000+.

In the meantime, the bank has $95,000 loaned out that’s NOT earning any interest, and according to federal regulations, has to keep 1-8 times the amount of the defaulted loan on deposit instead of loaning it out. Since the average foreclosure in my area takes about 9 months to complete, this means that for 9 months, the bank is losing 6% interest on over HALF A MILLION DOLLARS in depositor’s money. Total lost interest at 6%: $22,275.

When the bank buys back the property at the auction-which they will, since they’ll bid $95,000 on a house with an as-is value of $60,000-$70,000-they’ ll list it with a real estate agent for sale. When it DOES sell three months later for $70,000, they’ll pay the agent’s commission of 6%, all back taxes, plus the usual seller costs.

Three more months of lost interest: $7,000.

Agent’s commission on $70,000 sale: $4,200.

Transfer taxes, deed preparation, prorated property taxes etc: $1,500.
Total sale price: $70,000.

Total expenses: $39,975.

Net to bank: $30,025.

Selling to me for $50,000 and saving a year of hassle: priceless.

Bogus Belief #3: Seller bankruptcy stops foreclosure.

Many sellers seem to believe that if they declare bankruptcy, the lender can’t foreclose, allowing them to stay in the property forever without paying.

As the investor, this bogus belief makes trying to convince the seller to cooperate in a short sale difficult. Why would they want to sell if they think they can live free forever?

So it’s your job to be aware of this myth and inform the seller that bankruptcy actually DELAYS the sale for a number of months but does not stop foreclosure. This is therefore a critical fact to remember when talking to sellers in pre-foreclosure.

Bogus Belief #4: If the foreclosure auction is less than 6 weeks away, it’s too late to negotiate a short sale.

I used to believe this one myself. But that’s because I was making the mistake I warned you about in Bogus Belief #2. However, once I discovered that banks lose more money by not letting investors buy the property before the foreclosure sale, I realized that some lenders are actually willing to delay the auction in order to complete a short sale.

By attempting to negotiate a short sale even if the foreclosure auction is less than six weeks away, you’re helping the bank save money. And you’re helping the homeowner save his credit.

Bogus Belief #5: The seller can’t get any money if you’re not paying the bank in full.

This is true. Unless you are creative.

It is true that the seller can’t get any money for the sale of the PROPERTY that might appear on the closing statement. And this could be a deal-breaker for the seller who needs that $500 or $1000 in cash to move. Only there is a way to legally circumvent this dilemma.

Simply buy something else from the seller, such as appliances, furniture or any of his personal property you can use. Then put your purchase on a separate bill of sale, NOT on the closing statement.

It’s perfectly legal for the seller to get money, but keep in mind that it is impossible to get the bank to accept a short sale when there’s money for the seller listed on the purchase contract or the closing statement.

Most bankers realize you are probably giving the seller something to get out of the house. They just don’t want or need to know about it.

"RepoMan Cometh…Notice of Default Received…Now What?"

As the economy cools, mortgage foreclosures increase. Mike and Margaret had worked hard for all of their 10 years of marriage. During that period they had some rough patches and vowed not to get jammed up on their finances again. Mike from time to time would take a part time job to help make ends meet. Five months ago Mike was told by his employer that they were moving out of town and going to another state and merging the business and would not be taking any people with them. As an Informational Technology (I.T.) expert he kept the companies computers humming and made a decent living.

Margaret was staying at home to take care of an asthmatic child that needed acute attention almost around the clock. There were other medical complications that centered around this affliction that put a severe strain on the budget. Today, Mike and Margaret received a Notice of Default issued by the Mortgage Company by way of the local Sheriff who knocked on the door and served the notice of action. The order stated that all arrears, attorney fees and late charges would need to be made immediately or foreclosure proceedings would start right away. The total amounted to $8,493.22. Mike and Margaret had tried to work out a repayment plan as well other credit card debt consolidation. Without a job and being down four months on the mortgage payment and credit cards unpaid their credit scores plummeted below 500. Lenders were not willing to work anything out in the way of a new loan. The equity had shrunk since they had bought the house on top of the housing bubble two years ago. Values have fallen back now in their area and city. Behind every foreclosure is a sad story of people getting up against it.

What to do? Many people in this position chose to do nothing and somehow think that someone will swoop in and save them and all they have to do is wait. Denial abounds all the way to the Courthouse steps to the day of sale. A few states have a redemption period, other states it becomes a done deal at time of sale. Mike is frantically trying to find work but the I.T. jobs have all but dried up. When Notice of Defaults are filled in public records the sharks smelling blood start showing up on front doors with offers to solve their problems. All they have to do is sign a quitclaim deed over and agree to something like $1,000 and move out and the new owner will assume the liabilities. Letters pour in daily with similar offers of "help". Right at this moment, with all the costs to catch up and get current, there would be about $10,000 in equity when the smoke clears. Mike and Margaret decide to call three or four local Realtors and get a handle on some options. They also contacted a Bankruptcy Attorney to determine what those options would be in this particular case.

Mike and Margaret learned they could sell the property and ask the lender to consider a short sale, as selling costs are higher now (this is when the lender agrees to take less than what is owed). Short sales are given consideration by lenders as many foreclosures result in a 20% to 30% loss after the court house sale. The short sale may only cost a 10% write down. The seller gets nothing in this scenario. It was also mentioned that the seller could lease-option the property, which would involve sufficient money up front to pay the arrears and make the mortgage current. The lease option or lease purchase might be attractive to someone who has less than stellar credit but believe things will be better in a few years for the leasee/buyers by exercising the option and closing with a new loan. The original mortgage would be paid in full. A close relative may buy the home and lease it back to the Mike and Margaret. This would be a long shot. Mike and Margaret could try to sell the home themselves, but time is against them. They need to move fast and get a quick resolution on this challenge. The Bankruptcy attorney gave two options, a Chapter 13 Bankruptcy or Chapter 7 Bankruptcy (which now they would qualify having little income now). The Chapter 13 would allow them to put the arrears into the Chapter 13 Repayment Plan but the monthly mortgage payments would need to be made on time as well as to the Chapter 13 Trustee payments for all the other debts. Having gathered all the information they could, Mike went back and took two low paying jobs working 16 hours per day to hang on and get current. In this case, Mike and Margaret selected the Chapter 13 option.

If this is happening to you or someone you know, gather all the options and make a decision. To do nothing is just giving up. Bad things happen in foreclosures: divorces, health problems, credit erosion, BUT it is not permanent and it's not fatal. You can fight your way out of this and turn it around. Consider your options and take action Credit repair will be the final step. Reinventing oneself in other vocations will also need focus.

Dale Rogers
http://www.brokencredit.com

How to Avoid Foreclosure from Happening to You

Foreclosure is a term many people may have heard of yet are unsure as to what the term means exactly. Foreclosure is something which affects homeowners who have a mortgage or lien on their home and do not own the house outright. There are a few things which homeowners should be aware of with regard to foreclosure in order to prevent this from happening to them.

What Is Foreclosure?

Foreclosure is when a lender who currently holds a mortgage on one’s home can come in and repossess the home due to a number of reasons but mainly for nonpayment of a mortgage. For those individuals whose home is less valuable than their current loan balance, they may also owe a deficiency judgment as a result thereof.

How Do Foreclosures and Deficiency Judgments Affect the Individual?

There are many ways in which foreclosures and/or deficiency judgments can affect an individual. First and foremost, when a home is foreclosed upon that individual loses their living quarters plus any money which they have already paid for the home. When one has a deficiency judgment issued against them they will find that they will owe varying sums of money in order to make up the difference between the value of the home and the outstanding loan on the home. Also, it is important to note that either one of these incidents can affect the credit of an individual and cause a blemish on their credit rating for years to come.

Ways to Prevent Foreclosure

There are a few ways in which homeowners paying mortgages can avoid foreclosure on their beloved home. The first way in which to do so is to pay the mortgage bill on time. This is the primary answer for those who ask how to avoid foreclosure. For those who have difficulty with doing so from time to time, there are other ways to prevent this from occurring.

The homeowner should always address letters from the lender which revolve around late payments. Within these letters the homeowner will find important information that tells the homeowner what to do if they are having trouble making payments. The letter will ultimately include phone numbers and names of contact individuals at the financial institution so that they can discuss their payment issues with a lender representative. It is crucial for the homeowner to speak with the lender and not bury their head in the sand to avoid it. Avoiding a problem such as nonpayment of mortgages will not make it go away and will only make it worse.

Individuals who are having trouble making mortgage payments should also be certain to stay in their homes and not abandon the property in any way. This will only hurt the individual in the long run and make foreclosure even that much more of a possibility.

Lastly, if the home is a HUD home, there are HUD counseling agencies which will aid the homeowner in preventing foreclosure issues from arising. The homeowner should contact HUD authorities to discuss ways in which to keep their home and make payments.

Possible Alternatives to Foreclosure

For those individuals who have trouble making mortgage payments on their home and fear foreclosure, it is important to know about other alternatives which may be recommended besides the dreadful foreclosure. Not all of these alternatives will apply to each and every individual but some may prove to be very handy when all is said and done. The first is called a special forbearance.

The special forbearance is something which may be arranged by the lender whereby the homeowner receives a payment schedule adjustment and may also receive a suspension of payments for a certain period of time. The representative of the lender will discuss options with the homeowner and after reviewing their situation decide if a special forbearance is warranted.

Another alternative to foreclosure is the mortgage modification. A mortgage modification is where the homeowner has the option to extend the loan period or refinance their current loan to get a lower rate and therefore have lower monthly payments. This is a wonderful option for those individuals who do not make enough each month at the moment to currently pay their mortgage.

A partial claim is another alternative for homeowners facing foreclosure to consider. The partial claim is available to those individuals who have HUD loans. With this payment alternative, the Department of Housing and Urban Development would help the homeowner bring their mortgage up to the current balance by paying the money which is overdue. This is a way to help the homeowner get out from under the mounting debt and then try to get them on the right payment schedule.

Some individuals may find that selling their home is the best bet and they can do so by way of a pre-foreclosure sale. This allows the individual to sell their home for an amount less than the total mortgage amount due prior to having it sold via foreclosure sale.

Lastly, one may be able to submit a deed in lieu of foreclosure. Although this still will not prevent the homeowner from losing their house, it will help them in the long run by not having a foreclosure on their credit history.

Summary

Foreclosure is a serious matter for homeowners to face. However, it is important to know that there are ways to prevent foreclosure and alternatives to foreclosure do exist should such a thing be necessary in the end.

Home Foreclosures And Big Profits? Just Another Myth

Everyone would like to find a way to make a lot of money without doing a lot of work. Getting rich quickly seems to be the American dream. And if you watch a lot of late night television, you might think that you have found the ticket to fast riches by investing in foreclosed homes. There are advertisements that offer to tell you the "secrets" of buying distressed property with no money down and five figure profits in as little as 48 hours. Other advertisements state that foreclosed houses are available "in your area" at rock-bottom prices or that some troubled owners are "desperate to sell." Can this be true? Is there easy money to be made buying and selling foreclosed property?

Home foreclosure is the process by which a home is taken from a buyer by someone with a lien against the property. Most of the time, the lender initiates this when the buyer has not made payments on the mortgage for an extended period. Lenders are not really interested in taking back houses; they would much rather have cash. As a result, foreclosed houses are usually sold at auction in so that the lender might recoup their investment.

Due to rising interest rates and rising house prices, many people have found themselves with mortgages that they cannot afford. But are people really letting houses go at auction for pennies on the dollar? Can you buy a foreclosed home today and sell it next week for a huge profit?

The truth is quite a bit less exciting then the advertising would suggest. Here are some reasons why buying and selling foreclosed property isn't all it is made out to be:

There is tremendous competition at the auctions. Believe it or not, you will not be alone if you appear at a real estate auction. In fact, in these times of sky-high prices, bidders will be plentiful as everyone is trying to save a few dollars. Most of the time, the hammer price on such auctions will be very close to, and sometimes higher than, average market prices. The competition is fierce.

You must pay, in full, right away. If you do purchase a home in a real estate auction, you will be expected to pay for it, in full, immediately. If you don't have six figures in liquid cash sitting around, this might not be for you.

A lot of such property is damaged. Property damage is common, and you may not be permitted to do a full inspection of the property or the damage ahead of time. This is truly a case where "buyer beware" can apply.

There may be title issues. It may or may not be possible to obtain a clear title on the property. Most professionals who buy such property spend countless hours doing title research, thus putting a dent in the notion that you can make money this way on a part time basis.

What about the owner who is desperate to sell before the lender forecloses? The current market is still pretty lively. No one is going to sell you property at one third off when they can just put a "for sale" sign in the front yard.

The idea of making a fortune buying and selling foreclosed property is lucrative for those people who market books about the topic. For everyone else, it's an expensive, risky, time consuming job. If you are looking for a quick dollar, you won't find it in foreclosed property.

About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.homeequityhelp.net, a site devoted to information regarding home equity lending.

Pre-foreclosures Are The Best Opportunity

Before a bank actually takes back a property during a home foreclosure; a period of time must be served in which a public notice is given. This is known as a pre-foreclosure and it is your best opportunity to begin reaping the huge profit potential available in this sector of real estate investing. It is easy to locate pre-foreclosures because banks must publish significant details related to the pending foreclosure for the public auction that usually follows.

Why is it better to take advantage of this situation at pre-foreclosure rather than waiting until the property has actually been foreclosed upon by the bank?

This is a golden opportunity for you, first, because it means that if you are able to convince the homeowner to sell the property to you rather than waiting out the foreclosure you can avoid haggling for the property when it goes up for public auction. You see, if the homeowner is unable to come up with the cash to make the mortgage current then the next step will be for the property to be sold at public auction. This means that you'll be bidding against several other interested parties and there is a chance that you may lose out altogether or else have to pay more than you need or want in order to obtain the property.

Secondly, when you attend a public auction you need to basically have cash in hand or be able to put your hands on the money in a very quick fashion. When you deal directly with the seller you have a little leeway here. You don't necessarily have to walk in with a cashier's check.

In some cases the bank will actually purchase the home back at the auction and then they are stuck with trying to sell it after the fact. This is not a desirable situation because it is usually not in the bank's best interest to make it a well known fact that they have foreclosures. While they need to get rid of the properties for financial reasons, it is simply not good publicity, to make it known that they have foreclosed on someone's home. This can make it more difficult for you to deal with them. In addition, the bank will be incurring fees every day they hold the property and you may end up paying more money than you would have if you had been able to attain the property directly from the homeowner.

About the Author:
Sal Vannutini is the creator of Foreclosure Wizard. Dramatically increase your foreclosure investment profits, with one, easy to use software program. Get your free special report: http://www.foreclosurewizard.com

Short Sale Success Secrets With Foreclosures

If you’re an active investor in real estate investing, you may already realize one of the biggest issues real estate investors face: Finding Great Deals.

FORECLOSURES AT A 52-YEAR HIGH

With foreclosures at a 52-year high, there are thousands of deals available on the market, if you know where to find them and how to secure them. The first challenge you'll face once you locate the property is that most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!

Most investors will walk away from these deals because they see no obvious profit. That's because they don't know about the Short Sale.

WHAT IS A SHORT SALE?

The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy – buy the foreclosure from the bank at a big discount, sell the real estate, and make money! So how does it work?

SUCCESS WITH SHORT SALES CAN BE ACCOMPLISHED IN THE FOLLOWING STEPS:

Step 1: Always Do your research.

Many new real estate investors make the mistake of waiting until some subscription service sends you the list. The disadvantage is that a ton of other investors are also getting the list. If your first contact is to send a letter, forget it. Your letter will be lost in the huge pile the homeowner is getting from all sorts of other investors, credit repair etc. 99% of the time these go directly into the trash or a big basket unread. If you go directly to their door you've got a chance.

So if you're going to mail, be the first to act when the default notices are printed in the local newspaper. Or be the first at your courthouse, if that's where they're filed first. The key to finding investment-worthy properties is to act quickly. Be disciplined and mail out the letters the very same day—in fact take them to the post office. In this business, the early bird really does catch the worm.

Tip for Success: If you don’t have a company that publishes your notices of default, check with local title companies or bankruptcy attorneys to see if they offer these services; you need somebody familiar with the subject that visits the courthouse often.

Step 2: Develop your marketing strategy.
When you have located foreclosures, make sure your timing is swift. Mail your initial letters of approach to the homeowner the same day you discover the property. Placing ads in your local papers also helps to generate leads and find homeowners eager to avoid the credit penalties involved with foreclosing.

Tip for Success: A typical advertisement strategy taught in real estate training is to get listed in real estate or credit section of the classifieds. These ads typically have a bold, to the point headline, such as “Avoid Foreclosure” or “Stop Foreclosure, Today!” If you are targeting a specific property type, or reaching for higher market values, specify this in your ad. (Instead of simply “Avoid Foreclosure,” add your target market to the bottom of the ad. Example: “Avoid Foreclosure, call 1-800-555-1212. 500K and up.” You’ll make more money in real estate by reaching for high-value properties, and an ad like this shows your prospects that you specialize in helping those with higher value homes avoid foreclosure.

Step 3: Work with the homeowner.
You can’t get anywhere without the cooperation, and often gratitude, of the homeowner. The homeowner you are working with has obviously run out of options, but you’ll need their trust and confidence if you plan to short sale mortgages. Remember, in these situations, you are often looked at as the “rescuer”. Make sure you explain the homeowner’s part in the process thoroughly. Once they deiced to allow you to work with them, there is important paperwork you need them to fill out and sign:

1. an “Authorization to Release” form that gives you permission to contact the lenders and the foreclosing attorneys.

2. a sales contract – signed but leave the purchase price blank. You may need to change the numbers as you negotiate with the bank

3. a financial statement – to show they can't afford to make the payments

4. a hardship letter – to explain in personal terms what happened.

Tip for Success: Remember that this is a stressful time for the homeowner. It’s easy to get caught in the excitement of a prospective short sale profit. You can get them to make a decision when you are able to convince them that this is the right option for them Emphasize the benefits of working with you, and then ask for them to take action. Make sure to let them know that once your contract is signed, and the bank accepts it; they’ll be free to move on with their life.

Step 4: Negotiate with the bank.
Although banks don’t enjoy taking a loss, it is a simple fact of the lending business that short sales are a necessary evil for lenders. Indeed owning the property (a non-performing asset) is even more expensive than selling it for a loss. Consider:

Banks use short sales to drop unwanted property quickly without having to deal with the REO office and go through the long process of putting the home back on the market. When you speak with the Loss Mitigation department, remember, this property is actually costing them money! Federal regulations require somewhere between $300,000 and $800,000 (or more!) to be held in reserve by lenders, which is many times over the actual price of the bad debt.

When you call the bank and ask for the Loss Mitigation Department (the department that handles properties that are in foreclosure) tell the person handling the account that you are trying to help Mr. X with his foreclosure and you are willing to buy the property from him, but due to the condition of the property/declining values/etc. you are only willing to pay X amount. This is where your negotiations begin.

Be firm and polite, but don’t ever make threats to not buy or be forceful in your approach. Loss mitigators are often busy and overworked, and they want to see you as somebody who is minimizing the damage – and hassle – of the bad debt.

Tip for Success: Larger banks are the easiest to deal with when working with short sales and foreclosures. This is because the larger banks have more resource, more experience, and more loans! While there are some larger banks that don’t work with short sales at all, other banks, such as Wells Fargo or Fairbanks Capital, tend to work with a much larger volume of short sales.

Once you have worked with enough short sales, you’ll find that you have inside contacts at some of the larger banks; be friendly, ask them about their day, Develop a rapport. Sometimes, they’ll open up about problems they’re facing or current trends, which of course, you’ll need to keep on top of!

You don’t have to be a real estate pro to see the potential for making money with short sales, and now you definitely have some great tools to get started. Great deals in real estate are out there, and with today’s market, your potential for profit is limitless. Just keep in mind: do your research, market your services, and treat the homeowners and lenders with respect. When you use this approach with short sales, you can make a win-win for everybody, especially the officers at your own bank when you cash in on your profit!

In the next article, we'll discuss the tricks and tips in convincing the bank to take a big discount on the short sale.

Best of Success,
Richard Odessey



About the Author:

Richard and Michelle are experienced investors and founders of the premier site on the internet - http://www.InvestorWealth.com: training real estate investors to do high profit deals. Offering Free Teleseminars by the top real estate investors, how-to tools and kits and hands-on training with personal advice from experts from the comfort of your home

How to track-down pre-foreclosure sales

How to track-down pre-foreclosure sales

If you want to invest in pre-foreclosed properties, then you need reliable pre-foreclosure listings. Get them and a simple pre-foreclosure sale can be your chance to make the deal of a life time.

In real estate business everyone wants to make a healthy profit. Either individuals looking to buy a house with a dire budget, or bargain house hunters, all buyer s’ goal is to spend as little as possible. The major problem is that many people simply don’t know how or where to actually find those hard to pin down investments. It can be really difficult to come across unusually good deals when buying on the open market. If you’re really looking for savings that will create lots of initial reserves and maximum potential investment value, then you have to consider a pre-foreclosure sale as your best option.

Pre-foreclosure sales can turn into bargain deals on great homes, which can sometimes provide savings of as much as 50% off your initial purchase. How can this happen? Easily, providing it is dome correctly. A pre-foreclosure sale entails the direct contact between the homeowner, sometimes the lender, and the buyer, and that is a win-win situation. On one hand, the homeowners win because they make a pre-foreclosure sale, get the money and pay back the loan, so they are no longer in default; on the other hand, the buyer is also a winner, purchasing the property at a substantial discount and under a flexible sales agreement, depending on one’s negotiating abilities.

As a rule, the first step in every business is the most important and the most difficult, at the same time. When buying pre-foreclosures, the most important step is to get your hands on at a pre-foreclosure listing. Not just any listing, but a reliable, comprehensive and frequently updated pre-foreclosure listing. You don’t find these sorts of listings every day, still there are various medium that offer related information, namely local newspaper, lenders, and online services.

Local newspapers carry classifieds, which are informative but they are not updated on a daily basis and they provide information only for the local market. Lenders or banks can also be a source of information, provided you are lucky and get through the right officials willing to help you with a pre-foreclosure listing; otherwise, it is a waste of time.

Probate and divorce lawyers can also come up with long lists of homeowners willing to sell their houses very fast. It may sound awkward for some of us, but this is a daily reality. And if you have any moral issues, that you take advantage from someone else’s misfortune, think of it this way: they need to sell immediately and you offer to help them. You give them the money and they get rid of another major problem. These unofficial pre-foreclosure listings can lead to pre-foreclosure sales even before the properties hit the market.

Last but not the least, the internet proves to be a resourceful location when it comes to pre-foreclosure listings. There are many websites that will make lucrative offers like free listings, which are alluring for many people. What people don’t realize is that, most of the times, free listings are outdated and have hidden costs attached. So, the best option is to find a detailed, comprehensive and daily updated pre-foreclosure listing with no hidden costs attached, that can be efficiently and successfully used. A good start point is foreclosureconnections.com, a reliable foreclosure listings online service, where you can also peruse for valuable pre-foreclosure sale tips.

No matter how you get the information, always remember that pre-foreclosure listings are the most significant step in your real estate venture.

7 Big Reasons To Invest In Pre-Foreclosures

Looking for an "in" to real estate investing?

Working a nine to five job swapping time for money can be incredibly dispiriting. After the futility of it all hits home, it's all you can do to limit the number of home business opportunities you investigate to twenty per week.

One of the more compelling home business opportunities is real estate investing. Real estate investing is the perennial wealth builder, and the transition from working a job to achieving wealth through real estate investing is becoming increasingly well documented.

You've probably thought about investing in real state yourself but you've not gone for it because you thought you needed tens of thousands in savings for a down payment, and perfect credit along with strong banking relationships.

Well, you can get all that together if you want. It doesn't hurt to have those resources. But it's not necessary to have a huge pile of cash and perfect credit to buy a house cheap and resell it for a profit.

It's especially not necessary in the preforeclosure market. Preforeclosures are houses in the default phase of foreclosure; where the bank has filed initial foreclosure papers but the Sheriff Sale or Trustee Sale where the bank auctions off the property, or repossesses it if no-one buys at the auction, hasn't occurred yet.

Buying during the preforeclosure period is one of the best ways for anyone to get involved in real estate investing. With little more than a few hundred dollars and some specialized knowledge you can buy a house at a substantial discount and resell it retail picking up a five figure profit check in the process.

Don't believe it?

Well, let me give you seven reasons why it's true:

1) When people are in default on their mortgage they have stopped making payments to the bank. So when you are negotiating with the seller, and the bank, right up until the point where you buy, no-one is making the payments. For novice investors worried about holding costs this is a huge advantage.

2) Preforeclosures are a very well defined niche market. One of the most deadly mistakes rookie investors make is trying to be a jack-of-all-trades, going after any and everything they can lay their eyes on. The result of this lack of focus is they are soon back at their jobs. By being a very defined market, preforeclosures allow you to develop focused marketing campaigns and standardized processes to get deals completed and closed.

3) One of the fundamentals of real estate investing is contacting and talking "only" to motivated sellers, and avoiding all the rest. Sellers in preforeclosure are some of the most motivated sellers you will find. Their world has been turned upside-down, they are about to lose their house, and their motivation is such that they just want out of the house and the bank off their back. By buying houses from people in preforeclosure, creating 30%+ equity spreads on houses often in good condition is not a difficult thing to do.

4) Buying houses in preforeclosure enables you to create unusually large equity spreads. Recent economic uncertainty has caused a lot of foreclosures, and rising rates will cause more in coming years. If banks had to take back all of the properties that went into foreclosure the FDIC would shut them down. They know this, so they try not to take properties back they don't have to. By requesting the Lender discount what is owed on their payoff, large spreads of equity can be created on houses that are totally "maxed out" with loans. This can't be done on loans not in default.

5) Because Lenders are under pressure to liquidate bad loans rather than take the property back, large discounts can be negotiated. After becoming familiar with the issues that cause Lenders to discount, larger and larger discounts can be achieved as you hone your negotiating skills.

6) If your plan is to buy and hold the property, having good enough credit and financials to get bank financing excludes a great many people from getting into real estate. On top of that, if you do get a bank loan, your financial exposure is at it's maximum when everything is in your own name and personally guaranteed. Buying houses in preforeclosure allows you to simply take over the existing financing already in place. No qualifying needed. You can take title to the property in a Land Trust, begin making payments on the existing mortgage(s), and still get all the tax advantages, appreciation, depreciation without any of the risk of being personally liable for the mortgage and the property.

7) If you have ever bid at auction for property at the courthouse steps, you are only too aware of the competition breathing down your neck. Lots of mind games. The 40 thieves are talking trash to you trying to get you not to bid. If you are Larry Bird, no problem. Make sure you have $500K on your credit line though. However if you are not the 'Bird' and you don't pack half a mil' of credit, you can sneak in and avoid this NBA showdown by buying the house during the preforeclosure period... before the auction.

Make no mistake about it, there are many ways to make healthy profits in real estate investing. But when you look at how easy preforeclosure makes it to buy houses cheap and resell for five figure profit checks, all the while helping people out of agonizing life circumstances, it makes little sense to pursue real estate investing any other way.

About the Author:
Ben Innes-Ker is a father, best-selling author, and real estate investing warrior. He has developed the "Foreclosure Investing Letter" to help real estate entrepreneurs buy foreclosures with less effort and higher profits. To receive your 5 part mini-course that reveals real estate investing basics anyone can use to achieve this too, visit: http://www.the-foreclosure-investing-letter.com/

Government Foreclosures Guide

Foreclosure occurs when a homeowner fails to make mortgage payments on his homes. A homeowner is allowed to be late on a few payments, as long as they are paid soon. They have to pay the payments along with the late charges. Foreclosure homes happens when numerous mortgage payments have been missed and the homeowner is unable to rectify the situation with payments. The foreclosure process does not happen overnight. It can take up to three months, but do not be fooled by this lengthy time period. It is important to take action immediately on foreclosure homes. An average of 4% of all homes purchased will be foreclosed upon. Therefore, foreclosure is an issue to many people. Purchasing foreclosure homes may be beneficial to both the buyer and the homeowner if the purchase occurs at the right time.

Government foreclosures occur because owners fail to make mortgage payments on FHA insured loans or VA loans or because they fail to pay taxes or other amounts due to the IRS, USDA, or other government agencies.

You can buy a Government home for you to live in, or simply to rehab and sell for a fast profit. These foreclosures are offered to the general public through real estate agents that specialize in the sales of government homes.

HUD and the Veterans Administration (VA) foreclosure listings dominate the Government foreclosure market. Lending institutions are protected by the insurance provided by Fannie Mae and Freddie Mac on low interest loans offered to those who buy government foreclosures. When homeowners are not able to make their payments the banks refer back to the insurance attached to this mortgage loans. These homes then become government homes. Sometimes properties become government owned when they are seized from criminals.

There are large choices of available government owned listings including single-family homes, condominiums, and town houses, throughout different types of neighborhood all over the country. Prices for these homes may vary from one state to another. Some of these government foreclosure homes are older, but many of these available properties are comparatively new.

Truth Of Foreclosure Home - Disadvantages Of Buying Pre-Foreclosure

Sure you have known the advantages of buying pre-foreclosure, haven’t you? Adjustable agreement, up to 40% below market value foreclosure home, adequate time to research on the foreclosure home, lesser down payment, etc. Undeniable, buying pre-foreclosure has many advantages and they are real irresistible. Anyhow, there is always a balance point in everything. It’s true that buying pre-foreclosure has a lot of advantages, but there are also disadvantages of buying pre-foreclosure.

Depending on one’s needs, only you know which buying foreclosure approach (pre-foreclosure, auction and REO) best suits you.

First and foremost, the very first disadvantage of buying pre-foreclosure is getting contact with the foreclosure homeowners. Why say so? As you have already known, foreclosure homeowners are facing negative events of his life that causing him to fall behind his mortgage payment on that moment. Foreclosure homeowners are distressed. And the outcome of this situation, foreclosure homeowners usually refuse to meet with strangers or whoever he thinks unnecessary. To some foreclosure homeowners, this could may be help them to concentrate more on solving the problems, while to some other foreclosure homeowners, this will only isolate them from the problems. Either way, you will have works to do to get contact with them.

Some professional investors or real estate agencies will post their greetings, post card like stuff to foreclosure homeowner. But to me, it’s not good enough. It’s recommended to call up foreclosure homeowner in person. Talking to them is the best way to leave a deep impression to them; while calling can show your sincerity of buying his pre-foreclosure home too. Of cause, talking courteously and patiently is equally important. Put yourself in his shoe, do you want someone rude to take over his lovely home or someone gentle instead?

Buying foreclosure has risk in dealing with other liens. This is the second disadvantage of buying pre-foreclosure. Who knows how many lenders the foreclosure homeowner has borrowed money from? There are cases where homeowners get home loan from 2 different lenders to buy a house and get a third lender for home improving loan. These cases involve many legal works. You definitely can’t settle it by yourself, unless you are a lawyer and your spouse is a bank manager.

No jokes on the legal works. It’s really frustrating dealing with them. Thus, before buying a pre-foreclosure, make sure you do a throughout research on that pre-foreclosure home including its title deed, loan information, any hidden liens, etc. Get the professional help. And this situation contributes the third disadvantage of buying a pre-foreclosure. There are paper works to do to complete the deal and it’s time costly.

However, these 3 disadvantages are actually nothing compared to the return of buying pre-foreclosure. To conclude, great bargains need hard work. You have to do research and truly understand the process of buying pre-foreclosure. It’s recommended to buy a foreclosure book and do some real reading if you really want to get this pre-foreclosure bargain. I would say it worth your hard works.

About the Author:
Shawn Daren makes it clear on how to pick up great bargains on buying foreclosure.Learn the key of earning 100k in buying foreclosure.To know more on foreclosure,visit his buying foreclosure ( http://www.buyingforeclosure.biz ) website.

Buying A Home After A Foreclosure

Buying a home after a foreclosure is not an impossible task. With some careful planning and some savvy shopping, you can secure a mortgage loan even with a foreclosure in your credit history.

Wait At Least Two Years

Mortgage lenders focus on the last three years of your credit history when they consider your mortgage application. It is best to wait at least two years after a foreclosure. However, if you have a large down payment or a fairly good credit score, lenders sometimes make exceptions.

Save A Down Payment

One way to improve the terms of a mortgage loan is to have a down payment. A credit score of 600 or lower usually means you will need a down payment between 5% and 20%. Larger down payments will mean better rates. As a bonus, you can avoid PMI with a down payment of 20%.

Create Good Credit

A foreclosure doesn’t mean an end to your dreams of home ownership. After a foreclosure, take steps to build back a good credit score with regular payments on your bills and loans. It is also better to make small regular payments on credit cards than hit and miss with payments. You want to show lenders that you are dependable with paying your bills.

If you do run into trouble, call the billing company and make arrangements before they report you to the credit reporting agencies. Billing companies want to see their money and are often willing work out an arrangement.

Shop Around

When you are ready to look for a mortgage, compare prices online. Sub prime lenders offer loans to people with bad credit, but they don’t all charge the same rate. Make sure the lending company you pick offers competitive rates and fees. Mortgage websites now offer quotes from several companies, so you can pick the best financing offer.

Asking for quotes online doesn’t commit you to accepting an offer. So if you are hesitant about taking on a mortgage, online websites can give you an idea of what to expect.

Mortgage websites can also process your loan application online faster than a traditional mortgage office. Once you have submitted the needed information online, the paperwork will be sent out to you for final approval and your signature.



About the Author:

To see a list of recommended bad credit mortgage loan companies online, visit this page: www.abcloanguide.com/lessthanperfectcredit.shtml. Carrie Reeder is the owner of ABC Loan Guide. It is an informational loan website, with informative articles and the latest finance news.

Why Buy An REO?

Why Buy An REO?

An REO is real estate owned by the bank, and many investors consider an REO property to be money just waiting to happen. An REO is different from a foreclosure property in that the bank has already tried to sell it at a foreclosure auction and has had no luck getting bids. Because the property was not bid on, the bank then became the owner of the property. Naturally, the bank does not want to keep the REO any longer than possible, and this makes it a great opportunity for an investor. Not every REO is a good deal, but when you look at an REO you’ll commonly find that there is a lot of money to be made.

So, is this a foreclosure?

Technically speaking, the home was foreclosed on because the owner of the home failed to make their scheduled payments. The bank set up and went through a public auction, but there was not any bids placed on the home, so the bank ended up owing the property. Yes, the home was foreclosed on, but it is well past the foreclosure process and the bank will be anxious to get rid of the property.

Advantages of REO vs. Foreclosed Property

When you are thinking of buying an REO you have to distinct advantages that a buyer does not have with a foreclosed property. The first is that you are able to buy on your schedule, as you do not have an auction date to work with and around. You can make an offer of the home any time; you don’t have to wait for bidding to begin. Another big advantage of an REO compared to a foreclosed property is that you can inspect it before you buy, when you cannot do this with the majority of foreclosed homes that you think about purchasing. Being able to inspect the property before you buy will let you know how big of a project you will be dealing with.

Best types of REO to purchase

You might not think the type of loan the home was purchased with the first time around matters but it does. You should attempt to purchase REO’s that had a conventional loan the first time around, as you will likely get much better deals with these than you will if you look at FHA and VA loans. The federal government backs FHA and VA loans, and the government can actually buy them back if they are so inclined. Homes that had conventional loans the first time are often purchased for just a fraction of their value, meaning that they can make an investor a lot more money.

Which REO’s you should not purchase

Just because the bank owns a property does not make it a good deal. In fact, when you see that a home or property is an REO you have to wonder exactly what IS wrong with it. The house was not bid on because no one saw the worth in it. Did the home just not have enough equity? Were their IRS liens against it? Was the property just too badly damaged? You need to ask these questions. If the bank cannot answer the questions then you need to be even more skeptical. Take advantage of your right to inspect the REO so that you can see with your own eyes what may or may not be wrong, hire professionals if necessary as well.

One must also be sure that if they are purchasing an REO to fix it up and sell it, that the property is located in a desirable part of town. If the home is not located in a desirable part of town, you should really think about how wise of an investment the property may be. Perhaps location is why the property was not bid on at auction. There are three big things to consider when dealing with any type of real estate and those are location, location, location. Never let a seemingly good deal let you lose sight of how important location is for any piece of real estate that you intend to sell.

Why the bank will sell an REO cheap

Basically, a bank is not set up to deal with real estate. Sure, they give loans to people, but really, they are not equipped to buy and sell real estate. Because banks are not accustomed to dealing with real estate, it often takes them awhile to get the ball rolling so that they can repair the property, and get an agent to sell the property. What this means is that while the bank attempts to get their business together they are losing money hand over fist and the federal government often penalizes them for each and every REO that they acquire.

Because the bank is loosing so much money on each REO, they are willing to sell it fast and cheap. In fact, banks commonly sell an REO property for around 30% of its value just to be done with it. Sure, they end up losing money on the deal, but they end up losing less if they sell cheap now than they would if they kept the property for another six months while they try to pull everything together so that they can sell the property.

The great thing about working with the bank with an REO is that you aren’t buying site unseen. Because you can walk through the house and make all the inspections that you want, you can deal with them in a way that will give you the best deal, and the bank will typically be happy with any serious offer because it will get the house off of their hand and they will stop losing money.

Generally REOs are a great investment as long as you know what you are getting into. The bank simply wants to get rid of these homes, and if you find the right property and are ready to make the serious investment, it can be a great way to get off and running in the real estate business.

Foreclosure Information - Free Foreclosure List in California and other states.

Understanding REOs (Real Estate owned by banks)

If you are getting involved with real estate you may have heard the term REO without really knowing what it refers to and how it could play a part in your current or future investments. REO is actually just an acronym that stands for real estate owned by the bank. REOs aren’t all that common because the bank doesn’t want them, but they do happen and you can really cash in as a result.

How a Property Becomes an REO

When a bank forecloses on a home or property owner, it is requires by law to hold a public foreclosure auction. Sometimes, because of lack of publicity or other reasons the home will not get any bidders at the auction, and the bank will end up owning the property. When the bank ends up owning the property it is then known as real estate owned by the bank, or an REO. An REO isn’t something that the bank wants, but many investors consider them gold mines.

Why the Home Wasn’t Bid On

There are a variety of reasons that a piece of property will become an REO. The mot common reason is that the property had very little equity in it. Many investors will not bid on a property that has less than 30% equity. In fact, statistics show that banks end up with most houses that do not have at least 30% equity. Many homes become REO when the property was simply in terrible condition. Most investors or individuals won’t invest in a home that is in poor condition because they see it as too risky. When a home that is in poor condition becomes an REO they are often gold mines waiting for the right investor to come along. Another reason that homes are not bid on at an auction is because there are IRS liens attached to the property. The problem with IRS liens is that there is a 120 period after the purchase of the home that the IRS has the right to take the property and refund the money that you have paid for it, but not the money you have put into the house updating it. For some investors, this 120 day redemption period is just too risky.

Why the Bank Wants To Get Rid Of REO’s

Banks do not want to own property, which is not what they are set up for. Basically, an REO is the sign of a bad loan that was given by the bank and the REO is a liability, not an asset. Every month that a bank owns a piece of property means they are losing money.

One of the biggest reasons that a bank does not want an REO is that their insurer will make them pay a full or partial settlement on the property. The bank is also aware that it doesn’t matter how much they sell the home for at an auction, they will probably suffer a loss. Banks are actually penalized for having too many REOs by the federal government, as they have to borrow funds from the government to stay in business. The federal government views the REO as a bad loan, and has a vested interest in making sure that a bank does not make too many bad loans. The bank will also have costs that are associated with the property such as taxes, insurance, sewer, water, and electricity bills, as well as homeowner association dues. The property must also be maintained and winterized, all of this costing the bank money.
Another problem for the bank is that it is not used to having to deal with the fixing and selling of property. Banks don’t have contractors and such on hand to do the repairs, so they are at the mercy of contractors that may charge them too much for the services due. It also takes time to make a house marketable, and all of this time they are paying the costs to upkeep the home, when they aren’t used to doing so. The bank will usually hand the big task of managing and selling an REO to someone that has another job, a more important job, and this will actually end up stressing out bank personnel until the home sells.

The bank will also pay to hire a real estate agent to sell the property once it has been repaired. While this may not seem like a big deal to most people, it can add up when the bank is expected to pay at least 6% of the sales price to a real estate agent for every REO! These costs really add up over time, so it’s plain to see why the bank simply does not want an REO.

Why Investors Are Attracted to REO’s

Most investors know that homes that need some work done to them usually are the biggest gold mines. Because of this, REOs are generally a very attractive business deal for these investors. The banks are willing to do just about anything to get rid of their owned property, which means that businesses or individuals can get the bank to make them a really nice deal so that they can buy the home, do the necessary repairs, and then sell the home if they choose, and still be able to make some money for themselves. For those that know how to do it right, there is a lot of money to be made in REOs.

REOs aren’t hard to find because banks want to get rid of them as quickly as possible, and advertise them to the best of their ability. Investors simply need to inspect the property to be sure it is something that they can repair and still profit from if they want to. Many homes become REOs because they are not in a desirable part of town, so the investor that is looking into an REO must be sure that the home is in a desirable part of town if they hope to get their money out of it.

Author : John Nazareno @copyrighted 2006 all right reserveyou may used this article providing that you provide a live link back to this blogForeclosure Information

What to Expect At a Foreclosure Auction

Whether you are an investor that would like to get into buying foreclosed homes for your personal use or to flip the property or if you are having your home foreclosed on, you should know what to expect at a foreclosure auction. Of course, the actual steps that will be taken can vary a bit from state to state and from house to house, but it’s good to know what you will be getting into when you go to a foreclosure auction. Foreclosure auctions can be exciting, even fun, but knowing what to expect will help you make the most of the experience, whether you are an investor or a homeowner that is trying to get your house back.

Before the Auction

You’ll likely find out about the foreclosure auction in a local newspaper and on the flier may be information to pre-qualify for bidding. This will allow you to put down a deposit so that the auctioneer knows that you are a serious bidder and can fulfill your bid if you are the winning bidder. Being pre-qualified just sort of speeds up the process so that you don’t have to mess around with the deposit on the day of the auction. During this time you should also do some research on the house by looking into any liens that may be against the property, how much the property is worth, how much it has appreciated in the last few years, as well as property values in the area. If the home looks as though it will need some repairs, you should consider this as well when trying to come up with how much you will be willing to pay for the house. Without this research, no amount of knowledge about what goes on at a foreclosure option will help you because you won’t know where to start when it comes to actually making a good bid.

What Happens At the Auction

The auction will typically start with the auctioneer reading legal notices as well as a legal description of the property. The auctioneer will usually then begin taking bids on the property. If the auctioneer has pre-qualified bidders the process is more streamlined, if not, each time a bid is made the auctioneer will then ask for the bidders deposit check, which is typically right around $5,000 for residential auctions. After each bid the auctioneer will attempt to solicit bids for higher amounts. Each auction is different, but the auction increments usually are set by the auctioneer and may be by $100, $500, or $1,000 per bid. The auctioneer will continue to solicit bids by this increment until it is clear that the highest bid has been reached. Then, the auctioneer will announce, “Going once, going twice, three times, sold!” indicating that the auction is over and the property has been sold to the highest bidder.

Once the bidding has ended a foreclosure deed and purchase papers will be drawn up and validated by the new owner or purchaser and the mortgage holder. A grace will likely be given to allow the purchaser to find financing or to come up with the funds to cover the full amount of the bid. This grace period is usually 30 days unless the purchaser and the mortgage holder agree to other terms. After the grace period a closing will take place, so that the new owner can formally take the title to the property.

What Happens, Now?

The purchaser can do what he or she intended to do with the property, whether it is to move into the home or to sell it for full market value. The money paid by the purchaser will be distributed in order of priority, first of which would be taxes. After taxes money will be paid to the mortgage, then the second and third mortgage if applicable. If there is still money after paying these debts, remaining money will be paid to lien holders and creditors. There is a very slim chance that there will be money left over after all of the debts are paid, if this is the case then the monies will be paid to the former home owner.

What about the Original Owner?

The original owner will often be at the auction so that they can bid on their home, and this is legal as long as they have the deposit required. If the owner of the home that has been foreclosed does bid on the home they must remember that the deposit is not refundable and the deposit assumes that they will be able to finance the home within the grace period. Owners must also remember that if they buy the property back old debts may merge and become reinstated such as second and third mortgages that became void when the first mortgage foreclosed on the property unless one has filed bankruptcy and is truly free and clear of these debts. Owners will often drum up the funds to make the deposit so that they can have another 30 days to try to save their home. Owners may or may not be successful in their attempts to save their home at a foreclosure auction.

As you can see, there are a lot of things that go into a foreclosure auction, but none of them are all that difficult to understand, but knowing about them makes the auction more enjoyable. The auction itself is not all that complicated, but it can be very fast paced. At some foreclosure auctions there are a lot of people, at others there are only a few because of the location or just the debts attached to the property, or even the state of the property. If you are serious about the property you should pay close attention when bidding starts so that you are sure that you can get your bid in when you feel it’s time so that you have the best chance of being the top bidder.

Author : John Nazareno @copyrighted 2006 all right reserveyou may used this article providing that you provide a live link back to this blogForeclosure Information

No! The Bank Doesn’t Want Your House!

When faced with the threat of foreclosure it is very easy to assume that your bank or lender simply wants to foreclose on your home and it isn’t worth the fight to keep the home. This defeatist attitude will not help you keep your home, and the reality is that the bank does not want you to think like this! The bank really doesn’t want your home, and a bank never wants to foreclose. Ever. Having this information can help people that are in the process of being foreclosed on develop the right attitude and keep their homes instead of losing the homes that they have worked so hard for.

The fact of the matter is that foreclosures are a pain in the side of banking or financial institutions. They do not want to mess with the court proceedings, with the auctions, and with the local laws in your state or county. They simply want the money that they lent you when you purchased the home, paid in full with interest. If they foreclose on the home they aren’t getting that. Sure, they are getting the home back, but that is not what they set out to do. Foreclosure costs the bank money and they aren’t in the business of spending money, they are in the business of making money. So, if you work with your bank you can stop foreclosure a good deal of the time because they are just as adverse to the process as homeowners are. The bank will often work to keep the home with the owner harder than the owner is willing to work to keep their home.

While many of us feel contempt toward the bank while going through a foreclosure or when we are threatened with foreclosure, this needn’t be the attitude. Your bank wants to work with you to arrange for repayment, so start taking their calls and responding to their mailings. In the long run both you and the bank will be better off. The bank is so willing to work with most people that fall behind on their mortgages that they will often allow them to repay their debts before making current payments, they’ll help owners refinance so that they can more easily afford their monthly mortgage payments, and they’ll even waive late fees that can add up and make the situation even more overwhelming for those trying to get on top of their debts.

Most of us don’t think about it, but foreclosure isn’t good for the bank, either. It takes time to foreclose on a house, and during this time the bank will not be making any money off the money that was borrowed from them by the buyer of the home. The home will be sitting, sometimes empty and uncared for and the bank will often have to repair the home to make it suitable for sale or to keep up with deed restrictions. All of this costs the bank money that they did not intend to spend on your home.

Even when the foreclosure process comes to an end, the losing of money is not over for the bank. Many foreclosed homes are sold at auction, and while most of us assume that the bank makes back all of their money at auction, they often do not. The first buyer is usually required to pay the difference, but this is a debt that will commonly go unpaid for years because the foreclosed on owner simply cannot afford to pay back the money. So, the bank is still short the money that should have been paid on the principal, not to mention the interest that would have been paid over 13 or 30 years for the original mortgage.

Many people that are about to be foreclosed on will file for chapter seven bankruptcy. While this provides the owner with the respite that is needed from over due bills and collection agencies, this is not what the bank wants you to do. In a chapter seven bankruptcy all of the debt is usually taken away, meaning that the owner will be allowed to keep the home, but the unpaid debts will never be paid. The bank is expected to just deal with the loss and go on. This is another reason that a bank or lender will usually try really hard to work with the owing party, because they would rather wait for the money than not get it at all.

As you can see, the bank simply wants their money. They don’t like to foreclose on homes because it means that they won’t be getting their money right now, and they certainly won’t be getting the interest on the money that was borrowed from them, that they were planning on. Working with individuals that owe money gives the bank a better chance of recovering the funds that they are owed than taking a house.

It is important for people to realize that the bank simply does not want your home. They want to work with you so that you can keep you home and they can get their money that is due to them, with interest. Because the bank is watching out for themselves and they want their money, this gives the individual in debt quite a bit of wiggle room to work out payment arrangements and keep the foreclosure process from going any further. With this knowledge you can change your attitude toward the bank or lender and pick up the phone and respond to mailings so that you can get the situation straightened out. If you make a reasonable attempt to pay off the debt you will realize that the owner actually has the upper hand because the bank is willing to avoid foreclosure just as much or more than the owner! Foreclosure simply costs everyone too much time and money, and this does not just apply to the owner, it applies to the bank as well!

Author : John Nazareno @copyrighted 2006 all right reserveyou may used this article providing that you provide a live link back to this blog Foreclosure Information

Important Factors Regarding How to Buy HUD-FHA Properties

There are many different types of homes which can be purchased on the general market today. The United States Department of Housing and Urban Development is a federal agency developed for the purpose of managing federal housing and related issues. Within this encompassing federal department is the Federal Housing Authority which further carries out the goals of HUD. There are certain properties known as HUD-FHA properties and these will be discussed in detail as well as the process for buying these homes.

What HUD-FHA Does With Regard to Property Purchases

In order for a home to be a HUD-FHA home, it has to be owned by the federal agencies. They obtain the initial property in the following manner. Individuals can apply for a HUD-backed loan through their individual lender. From that point onward, HUD vouches for the repayment of the loan and will repay the lender should the borrower fail to do so. In the event that the homeowner fails to pay their mortgage and a foreclosure is instituted, HUD will repossess the property, pay off the lender any amount currently due and then take full ownership of the property. From this point onward, the property belongs to HUD and the agency can dispose of the property as it sees fit.

After the property has been taken and is in the rightful ownership of HUD, the next step is to sell the property to another homeowner. If HUD uses a real estate broker to initiate the sale of the home, the broker will take over certain pertinent duties related to the sale of the home and receive a commission, usually 6%, for doing so. It is important to note that real estate agents are allowed to bid on HUD homes and purchase them on their own but need to go through a HUD broker.

As for the condition of a HUD property, all HUD properties are sold as is on a cash basis. This does not mean that an individual has to have cash in hand to buy it but they will need to obtain a loan from an outside lender. HUD homes are usually of a lower to intermediate price range of home and some homes will be in better conditions than others will.

How to Find a HUD-FHA Home

There are a few different ways to locate HUD homes. One who is interested in buying a HUD home can search the newspaper real estate advertisements, contact a HUD broker or contact HUD directly for a listing of HUD brokers in the area. Once a potential HUD home is found, it is time to proceed with the purchasing process.

Buying the HUD Home

When a potential HUD home has been located and the individual is expressing an interest in purchasing it, it is important to adequately inspect the property and make sure it is what you are looking for, both inside and out. If the house is what you desire, you will need to submit a HUD bid package to the area HUD office with a 5% deposit. This deposit is non-refundable should the prospective buyer fail to follow through with the purchase. The individual will wait for the bid to be accepted and if so, will have 30 days to close escrow.

Reasons to Buy a HUD-FHA Home

Perhaps the number one reason to purchase a HUD home is for the reasonable price that is being offered on the home. HUD homes tend to be more reasonable in price than non-HUD homes so it entices individuals to show an interest and ultimately purchase homes of this type.

Some individuals buy HUD homes not only for the price but also for the overall quality of the home itself. Although most HUD homes are of a modest level, there are some which individuals find to be perfect for their needs. Whether they have the right amount of bedrooms and bathrooms or are in a desired location, some people buy HUD homes without ever really looking for a HUD home in particular.

Summary

Taking advantage of the homes which are offered by HUD is extremely attractive for many individuals. Not only are these homes reasonably priced but they are also on the market and off of the market as quickly as possible since HUD is anxious to sell the home and have one less home to look after. If an individual is looking to buy a home that is reasonably priced, usually a quick sale and at times in the perfect location for the homeowner, then considering the purchase of a HUD home might be the perfect thing for a prospective homebuyer to do.

Author : John Nazareno @copyrighted 2006 all right reserveyou may used this article providing that you provide a live link back to this blog.Tax Liens