Pre-foreclosures: The Goldmine Of The Next Decade Foreclosure is a process in which a piece of real estate becomes the property of a lending institution due to the legal owner's inability to make scheduled payments on the mortgage or deed of trust.
Typically, the lender files a notice of default after a homeowner fails to make his or her mortgage payments for several months. If the loan is not reinstated, the lender moves to foreclose. As a result, the lender becomes the new legal owner of the property and has the right to resell the property and recover any outstanding loan balances in addition to foreclosure expenses.
The foreclosure process consists of three stages: pre-foreclosure, which begins the redemption period; foreclosure, which is when the home is sold at a public auction; and post-foreclosure, which is when the property reverts back to the lender if it fails to sell at the public auction. Although each stage offers bargain-buying opportunities, the pre-foreclosure stage is considered by many real estate investors to be the most promising time to purchase during the foreclosure process.
Investing in pre-foreclosures means you will be acquiring property any time before the scheduled public auction. As the investor, you will be buying the property directly from the owner. The earlier you contact a homeowner in pre-foreclosure, the more time you will have to make a connection, structure a deal and purchase the property.
There is a common misconception that real estate investors purchasing homes from owners facing foreclosure are taking advantage of the homeowner's misfortune. This is simply not true. A Notice of Default is filed only when a borrower (property owner) has broken the terms agreed upon with lender at the inception of the loan in default. This breech gives the lender every right to protect its financial interests. Therefore, an experienced real estate investor becomes the problem solver by finding a win-win solution that will help the homeowner get out of default.
Property owners facing foreclosure are typically scared or in denial. Many of them hope some miracle will happen that will make their ordeal simply go away. Doing nothing will certainly ensure a homeowner's foreclosure, loss of home, loss of equity and credit rating damage for an entire decade.
When dealing with an owner in pre-foreclosure, talk to them as soon as possible. It is vital to explain the following three benefits of avoiding foreclosure:
1. Protects their credit
By working with an investor, homeowners may be able to avoid foreclosure and begin rebuilding credit. Even if a homeowner endures the process of losing his or her home, the repercussions of a foreclosure on a credit report are far reaching. A poor credit rating affects everything from buying a car to renting a home. With certain businesses, credit is even a factor in employment. Investors often help homeowners protect credit.
2. Make a profit
While it is true that real estate investors purchase at a discount, a homeowner facing default may still be able to recover some of their equity and walk away with profit.
3. Get a fresh start
Stopping the foreclosure allows homeowners to breathe a sigh of relief. As the pain and pressure of the foreclosure lifts, they find it easier to move on and begin rebuilding their life.
Buying in the pre-foreclosure stage can be the most lucrative slice of a real estate investor's business. Once rapport and trust have been established, a professional real estate investor can determine whether the sale of a property would truly benefit everybody involved.
There are various ways to profit while helping people find viable solutions for their defaults. The following three are most common:
1. Purchase at a discount
Real estate investors are not likely to make a profit by purchasing at full market value. As an investor, it is essential to inform potential sellers that you earn your living from your profits. Therefore, you must buy for less than retail price while taking into account acquisition, sales and holding costs and any necessary repairs. A discount of twenty to thirty percent of full market value is common practice among real estate investors.
2. Buy property "subject to" the existing loan
There are widely spread rumors that it is illegal to purchase property that involves taking over an existing mortgage. This is completely false. While assumable loans are practically extinct, it is perfectly legal to purchase property subject to an existing loan. It is important to be aware of the "due on sale" clause stating the existing lender can call the loan due upon the transfer of title. In other words, the lender has the right to demand full payment of the outstanding loan balance at the time of transfer. In practice, lenders would rather receive their monthly payments than call the loan. Purchasing property subject to the existing financing means a smaller out-of-pocket investment for the real estate investor.
3. Create instant equity utilizing a Short Sale
Structuring a Short Sale can prove profitable when dealing with a homeowner facing foreclosure whose property is equity deficient. In this market, troubled lenders would rather discount their mortgages than increase their already mounting inventory of foreclosed properties. The type of discount you create will largely depend on the quality of your Short Sale package combined with the quality of your negotiating skills.
Real estate investors prevent a large number of foreclosures every year across the country. There are many ways for investors to make a profit while helping people move on with their lives.
Undoubtedly, the money is there to be made. Pre-foreclosures are a fabulous way to make it.
Brenda Coté is a Real Estate Investor, Real Estate and Mortgage Broker, Mentor, and Wealth Coach. At Transforming Lives, Creating Wealth, Brenda employs a "whole person" approach to support female Real Estate Investors succeed in business and life. To download Brenda's FREE audio workshop, "The Seven Elements of a Wealth-Creation Mindset" please go to: www.TransformingLivesCreatingWealth.com
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Federal judge: Texas law governs Utah foreclosures - Salt Lake Tribune By Tom Harvey The Salt Lake Tribune
Published Feb 10, 2012 12:18PM MDT
A federal judge has ruled that Texas laws and not those of Utah govern foreclosures by a unit of Bank of America. In doing so, U.S. District Judge Ted Stewart has dismissed a proposed class action lawsuit against the bank and its foreclosure arm, ReconTrust, as well as an attorney who performs the foreclosures In Utah for the bank. The lawsuit was based on a Utah law that says only Utah attorneys and title companies with offices in the state can act as a trustee and foreclosure on property. But ... ... Utah to get $171M in huge foreclosure deal - Salt Lake Tribune By Tom Harvey The Salt Lake Tribune
Published Feb 9, 2012 09:41PM MDT
Utah is receiving an estimated $171 million in money, reductions in mortgage principals and loan modifications as its portion of a sweeping $25 billion deal struck by 49 states and the federal government with five of the largest U.S. banks. Many Utah homeowners who lost their homes to foreclosure over the past four years will get about $2,000 apiece in compensation. Those who are being foreclosed on or whose loan is for more than their home is worth (known as being underwater) could receive red... ... Attorney general's pressure on banks paying off - SFGate: Op-Ed Attorney general's pressure on banks paying off Mortgage settlement is too little, too late for many - Chicago Tribune: Nation Mortgage settlement is too little, too late for many Mortgage settlement is too little, too late for many - LA Times: Business Some who suffered foreclosures say the payouts are a pittance, and many homeowners in trouble won't qualify for help.<br/><br/>The massive mortgage settlement may be setting new national standards for loan servicing, but it may be too little and too late to help troubled homeowners.
<p><a href="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/0/da"><img src="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/0/di" border="0" ismap="true"></img></a><br/>
<a href="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/1/da"><img src="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/1/di" border="0" ismap="true"></img></a></p><img src="http://feeds.feedburner.com/~r/latimes/business/~4/uKa70eYGLUY" height="1" width="1"/> Utah oil-gas firm may lose leases over unpaid debt - Salt Lake Tribune By paul beebe The Salt Lake Tribune
Published Feb 9, 2012 03:39PM MDT
A British company has started foreclosure proceedings against the assets of Richfield Oil and Gas Co. for failing to repay a loan that was overdue by one day. Nostra Terra Oil and Gas CEO Matt Lofgren on Thursday refused to explain why his company moved so soon against Salt Lake City-based Richfield, saying only that ?not much? was disclosed by Nostra Terra about the foreclosure it initiated Feb. 1. Douglas Hewitt, Richfield?s CEO, said his oil and gas exploration company does not understand why... ... Birthplace Of 'Robo-Signing' Eyes Deal Critically - NPR News On Thursday, the federal government reached a $26 billion deal with the nation's largest banks to compensate homeowners. In Florida, where a lawyer uncovered and named the rushed mortgage-approval process, some lawyers and homeowners say technical issues and trust battles remain for courts and the banks. Utah to get $25M from foreclosure-abuse deal - Salt Lake Tribune Staff and news services
Published Feb 9, 2012 10:02AM MDT
All but one of the states have reached a $25 billion deal with the nation?s biggest mortgage lenders over foreclosure abuses, and Utah?s share will be as much as $25 million. Although Utah Attorney General Mark Shurtleff said earlier Thursday Utah?s share would be $100 million, his staff is now indicating the figure will be closer to $25 million. Shurtleff described the settlement as ?a new day for those in Utah who were victimized by big banks? shoddy practices.? Federal and state officials joi... ... Rental costs soar in RI during foreclosure crisis - Boston Globe: Rhode Island Rental costs soar in RI during foreclosure crisis Soup kitchen planned for RI Statehouse - Boston Globe: Rhode Island Soup kitchen planned for RI Statehouse Rosenblum: Hey, Peter Max lovers: Did you paint this car? - Star Tribune: Local Soup kitchen planned for RI Statehouse Deal to settle foreclosure abuses moves closer - Salt Lake Tribune The Associated Press
Published Feb 7, 2012 05:15PM MDT
Washington ? Arizona, Michigan and Florida, three of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, officials with direct knowledge say. They will join more than 40 other states in approving a deal that would benefit many Americans who lost their homes or can?t afford their mortgages. The three states? involvement buoys hopes that a full 50-state deal is imminent. Formal announcements from Arizona and Florida could come within a week, ac... ... Volunteers/Donations Needed 2/7 - Denver Post: News: Local Volunteers/Donations Needed 2/7 Advocates to hold RI Statehouse soup kitchen - Boston Globe: Rhode Island Advocates to hold RI Statehouse soup kitchen Big foreclosure servicer indicted for 'robo-signing' - MSNBC In one of the first criminal prosecutions in the post-housing bust era, DocX has been indicted on forgery charges by a Missouri grand jury, The New York Times reports.<br clear="both" style="clear: both;"/>
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<br clear="both" style="clear: both;"/> Barack Obama: Solving the housing crisis - Salt Lake Tribune By barack obama
Published Feb 7, 2012 01:01AM MDT
In my State of the Union address, I laid out a blueprint for an economy that?s built to last ? an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values of fairness and responsibility. Over the past decade we strayed from those values and we saw what happened. Millions of families who did the right thing were hurt when the massive housing bubble burst. Folks who shopped for a home they could afford, secured a mortgage and made the... ... Pinole good Samaritan faces foreclosure - San Jose Mercury News: News Former East Bay Municipal Utility District plumber severely injured while stopping to help stricken man on freeway; faces mounting debts. DocX Faces Foreclosure Fraud Charges in Missouri - International Herald Tribune: Business The charges against DocX, which provided home foreclosure services to lenders across the nation, are one of the few criminal actions to follow reports of widespread improprieties against homeowners. Key states move closer to foreclosure-abuse deal - Salt Lake Tribune By DEREK KRAVITZ The Associated Press
Published Feb 6, 2012 06:41PM MDT
Washington ? California and New York, the key holdouts in a long-awaited settlement over foreclosure abuses, moved closer Monday to backing a deal with most other states that would force the five largest mortgage lenders to reduce loans for about 1 million households. But those states, along with a handful of others, had not joined the settlement by a Monday deadline set by the nation?s state attorneys general. And a deal might not be finalized for days. California still has ?significant sticki... ... Mortgage relief: Partial plan better than none - Yahoo! News Search Results for mortgage The architects of the joint state-federal mortgage releief plan believe it would be better for homeowners to get a partial deal than nothing at all, according to sources. Occupy Bernal, Petaluma zero in on foreclosures - SFGate: Business & Technology Occupy Bernal, Petaluma zero in on foreclosures OccupyMN Fences Off A Foreclosure-Free Zone In S. Mpls - WCCO: National <img width="150" height="112" src="http://cbsminnesota.files.wordpress.com/2012/02/occupymn.jpg?w=150" class="attachment-thumbnail wp-post-image" alt="(credit: CBS)" title="Occupy Minnesota S. Mpls Home" />The group Occupy Minnesota stepped up their efforts Saturday to prevent foreclosures. <img alt="" border="0" src="http://stats.wordpress.com/b.gif?host=minnesota.cbslocal.com&blog=15909630&post=211019&subd=cbsminnesota&ref=&feed=1" width="1" height="1" /> GOP candidates shy away from Nevada housing crisis - SFGate: Top Stories GOP candidates shy away from Nevada housing crisis Thousands of condo owners stuck in condos they can?t sell - Salt Lake Tribune By LESLEY MITCHELL The Salt Lake Tribune
Published Feb 3, 2012 04:46PM MDT
Pete Farley?s condominium is tidy, updated, clean and in a good neighborhood. And with a listing price of just under $175,000, it is affordable to most buyers. All of those things should make it an easy sell in today?s real estate market. Instead, the condo unit is largely unsellable. The problem is that Farley?s condo community lacks certification from the U.S. Federal Housing Administration. And without that seal of approval, buyers with FHA-insured loans ? and some with other types of loans ... ... Obama seeks to broaden reach of housing assistance - Salt Lake Tribune By JIM KUHNHENN and BEN FELLER The Associated Press
Published Feb 1, 2012 05:59PM MDT
Falls Church, Va. ? Conceding his earlier housing programs have fallen short, President Barack Obama on Wednesday proposed a vast expansion of government assistance to homeowners, aiming to make lower lending rates a possibility for millions of borrowers who have not been able to get out from under burdensome mortgages. The president?s proposal is laden with election-year politics and faces a difficult path in Congress. Obama wants to pay for the estimated $5 billion to $10 billion cost with a ... ...
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