Foreclosure Basics

Whatever property there is, a near foreclosure is always not something to be happy about. This is the total opposite of what a homeowner would end up. This is actually a nightmare no one dare waking up to. It can affect almost all of one’s life aspects.

The Upside to Foreclosures

A foreclosure can be beneficial to the other side of the coin which means this will be a terrific deal for the real estate industry. The hope for all parties to the transaction win by profiting from a time-consuming title transfer, it might also spare the home owner’s credit rating before things get any worse.

The Downside to Foreclosures

Gaining from foreclosures isn’t always a good thing like what people think of—for one good story, there are worst cases too, and they are far more. Every real estate transaction is risky. Investors are here to rescue but they cannot really eliminate the risk factors.

The Three Types of Foreclosures.

• Pre-Foreclosures: In the pre-foreclosure stage, in this stage, investors will do everything to help out homeowners and also themselves. This is where damage to the homeowner’s credit rating can be avoided. Equity redemption should be considered here. Potential leads in finding these properties will be from an accountant, lawyers, real estate agents, friends and business associates.

• Foreclosure Stage: This is the best way of determining a potential property from the County Clerk’s office. Find out where the notices of default are filed and determine how to sort through the general index to discover pending foreclosure sales.

• Non-judicial foreclosures pertain to deeds of trust where a third party, called a trustee, handles the entire process in a matter of two to four months after a borrower has defaulted and cut off payments. Once the property passes through either the judicial or non-judicial phase, it is then ready to be sold at auction to the highest bidder.

• The foreclosure process itself will vary from one state to the other depending on whether it is a title or lien state, which determines whether a judicial or non-judicial form of foreclosure is involved. Judicial foreclosures pertain to mortgages, rather than deeds of trust and take significantly longer to complete.

• Post-Foreclosure: Lastly, The lender is in control of the property. The home is then in the possession of the lender’s REO (Real Estate Owned) department, or in the hands of a new owner or investor who bought the property at auction.

• If the property ends up in the hands of a private investor, rather than with the lender, you may still be able to make an offer either on your own or with the help of a real estate agent. However, the price at this point may not be rock bottom.

• Refer to the foreclosure notice to determine the name of the lender as well as the balance owed on the mortgage. Lenders are typically extremely willing sellers because an REO on the books is an obvious sign of having made a poor lending decision. Both the overhead and losses involved with an REO—reflected in both the added reserves a lender must maintain as well as any potential property management fees incurred—means the bank is likely a negotiator that is willing.

An investment key here is wherein the foreclosure process you enter. It is both risky and critical to identifying which stage to become an expert and be successful at in becoming a long term investor for properties that needs help.