Real Estate Investing Learning – The 411 on Foreclosures
Foreclosures are always 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 There So Many Foreclosures?
The U.S. is at an all time high in the number of foreclosures filed a few years ago. 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 had become increasingly easy to get, and the interest rates were down, as a result more people had mortgages than in the past. This meant that there were just simply more loans to be foreclosed.
There were a vast number of loan programs available that virtually anyone could qualify for. Many of these loans were variable rate, which allowed home owners to get into the loan with very low payments, that would increase at a later date based on the prevailing rates.
Other programs allowed people to qualify for very large loans with little documentation and no proof of income.
Many other people with fixed rate loans refinanced to these ‘modern’ loans to get lower payments and/or cash out from the loan. The end result was a lot of happy people in expensive homes that they could not really afford.
Of course the perfect storm then hit, the economy and the stock market went South quickly. Many people lost their jobs, and the much higher variable rates were hitting, which doubled many people’s mortgage payment.
Property values plummeted, so people could not afford their mortgage payments and they could not sell, because with the lower property values they owed more than their home was worth. End result; the worst foreclosure crises since that our country has seen in decades.
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.
Foreclosures happen to properties that range from condemned junkers to multi-million dollar upscale homes.
Won’t Bankruptcy Stop Foreclosure?
No, it may 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
Learn how the state’s foreclosure process works
Learn how to find out about foreclosures early in the process
Learn how to approach people in foreclosure
Learn when to approach people in foreclosure
Learn how to help people in foreclosure
Learn what strategies work best for certain foreclosure situations
These are all very important points to consider. You can only learn through experience. Investors will be glad to teach you the ropes, if you provide something of value to them.
Real estate jobbers provide Investors with property leads that save them time and money. In exchange the Investor will teach real estate jobbers how the local foreclosure process works, and pay a referral fee if they are able to buy a property based on a real estate jobber lead.
Again it’s win-win!
Barry Grimes is a Certified Life Optimization Coach, Author of the Real Estate Jobber Course, Life Optimization After 50 and Success Affirmations for Life Optimization.
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