The 411 on Foreclosures
Foreclosures is one of the hottest areas of real estate investing.
Foreclosures offer an opportunity for real estate Investors to help a
homeowner out of a terrible predicament.
Why are Foreclosures So
"Hot?"
Foreclosures continue to rise all over the U.S. One real estate agent
who typically sold just a couple of foreclosed properties a year, sold
168 last year alone. These properties ranged from $5000 junkers to
$225,000 upscale homes. Some of these homes were simply abandoned and
left for the bank to take back.
A small county in Tennessee without any major cities had 1,744
foreclosures listed last year. The cause was a few local furniture
plants closing. Unemployment has caused the number of foreclosures to
steadily rise all over the country.
The Top 10 Counties for foreclosures in 2003
Why are There So
Many Foreclosures?
The U.S. is at an all time high in the number of foreclosures filed.
The main underling reason is the economy.
We are also at an all time high for mass layoffs, "off
shoring" and major corporate bankruptcies due to scandals. Plain
and simple, people who are out of work, don't have the money to pay
their mortgages.
Mortgages have become increasingly easy to get, and the interest
rates have been down, as a result more people have mortgages than in the
past. This means that there are just simply more loans to be foreclosed.
What Exactly is a Foreclosure?
A foreclosure is basically a defaulted loan, where a property is the collateral.
When the borrower fails to make the loan payments, the property is
foreclosed by the lender. The lender now owns the property.
The foreclosure process varies by state. In some states it takes as
little as 4 weeks to foreclose a property, while other states can take
six months or longer.
Once the property is foreclosed it is usually sold at a
"Sheriff's Sale", or something similar. The bank will not get
the full value of the property. The bank will also have a defaulted loan
on it's books, which is a major blemish. So, it's understandable why
banks don't want to own real estate.
Won't Bankruptcy Stop Foreclosure?
No, it will delay the foreclosure process, but it won't stop it. Once
the bankruptcy is final and the debts discharged, the foreclosure
process will begin again, if the back payments and fees have not been
paid.
A bankruptcy is a major blemish on a person's credit report, but in
all likelihood the person will be able to get another mortgage in a
couple of years. The situation causing the financial problem is usually temporary,
and most people bounce back.
A foreclosure however, will prevent another home loan for several
years. It's a much more serious problem than bankruptcy. Most people
don't realize this until educated by a real estate investor.
Aren't Real Estate Investors Predators
Preying on People's Problems?
No, not at all. In fact it's usually the exact opposite. Real estate
investor's are the last hope for many people. Real estate investors are
going to pay less than the fair market value, but what's the
alternative.
The homeowner will get nothing for their property, and have a major
incident on their credit report for several years. The bank will have to
take back a property that it really doesn't want. No one wins in this situation.
The real estate investor offers a service and a solution. The
Investor buys the property, makes up the back payments and fees, and the
homeowner's credit does not show a foreclosure. The bank does not have
to take the property back, and the Investor can sell the property to new
buyers for a profit. It's a win all the way around!
Aren't Foreclosure Laws
Complicated?
Yes, that's where real estate jobbing can be a great benefit. You
will learn first hand from experienced Investors.
