Lee Morof's Real Estate Blog

Sometimes, things don’t go as planned. Despite the best intentions, there are times when it’s impossible for homeowners to fulfill their mortgage obligations. When your misfortune turns into a foreclosure notice, these tips will help you control the situation and realize the best outcome.

Work With Your Lender

Open the lines of communication with your lender to stall the foreclosure process.

• Call your lender and explain your predicament. Give them specific details about the nature and estimated length of your circumstances. Many lenders are willing to temporarily modify payment terms to temporarily accommodate certain hardships.

• Apply for a loan modification. If your credit rating has improved or market values have shifted in your area, it’s possible to negotiate friendlier terms that lower your monthly payments.

• A forbearance allows you to pause or drastically reduce your mortgage payments for a short period. However, you’ll have to pay everything owed in a lump sum or via larger monthly installments.

It is in your lender’s best interest to keep you in your home. Contact them early to avoid unnecessary issues.

Take Legal Action

Keep the law on your side to ensure you have the best chance at keeping your home.

• If you believe your foreclosure is unlawful or in error, you will have the chance to present your case in court. Respond in writing to the official foreclosure complaint as soon you receive it. This eliminates quick default judgments.

• Talk to a lawyer about your case. Even if you can’t afford to retain one for the trial, invest in a short sit-down session with a knowledgeable legal representative to get the facts straight and ensure you’re ready to present your defense.

• Personal bankruptcy is a final strategy for saving your home. Most chapter 7 and 13 filings allow you to keep your primary residence while reorganizing your debt.

Foreclosure is less of a threat when you understand the laws and procedures that govern the process. Educate yourself on your legal options.

A temporary setback doesn’t have to ruin your entire life. With these tips, you won’t have to lose your dream to foreclosure.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional for assistance.

Foreclosure is a process that happens over many months. There are various opportunities to acquire real estate that is in a different stage of foreclosure, including before the foreclosure process completes. This short guide identifies the different stages and the opportunities that may exist to acquire a property at a discounted price.

Get The Money Lined Up First

To acquire a property at any part of the foreclosure process requires cash or pre-approved credit. Have the full amount of cash available to pay for the transaction or have a recent pre-approval letter from a reliable lender. The letter shows the amount of mortgage financing available and approved for buying a foreclosure.

Pre-Foreclosure

Before a lender forecloses on a home, to take legal possession of it, they must go through a legal process filed with the courts. All those legal filings are public records.

The borrower, who is in default on the loan, gets a legal “Notice of Foreclosure” that gives a date when the foreclosure will occur. There are subscription services that collect these dates from the court records and assemble a database of information about the properties coming up for foreclosure.

Up until the foreclosure date, it is possible for the homeowner to make a deal to sell the home, which pays off the lender and that stops the foreclosure.

Sometimes the existing loan can be acquired and the past-due payments brought up to date and that is all that is needed to satisfy the lender. In other cases, the outstanding loan must be paid off entirely or refinanced by the new owner.

To find an attractive deal in this stage of the foreclosure, a real estate investor looks for a property that has significant equity and the loan(s) on the property are far below the market value of the property.

If the home continues to foreclosure then the existing owner will lose all the equity they have in the property. This makes the owner very motivated to sell the property at any price, even at a steep discount, which helps them to not lose everything.

Foreclosure Auction Sales

Some lenders immediately put a property up for auction right after foreclosure. An investor with an interest in these foreclosed properties, bids with other bidders at the auction. The highest bid wins.

All that is needed is to get on the mailing list to be informed of upcoming auctions and have a cashier check in hand for the required deposit at the auction to be able to bid.

REO Properties

Other lenders take ownership of foreclosed properties and then sell them off through authorized broker/dealers who work for the lender. Some lending systems, like HUD, for example, maintain a public database online that shows all the foreclosed properties that are for sale and their minimum offer price.

Creating personal relationships with the bank/lending officers who manage REO properties is a terrific way to get leads. It helps to have the first chance to buy a foreclosed property, which is recently added to a lender’s REO system, that other investors may not yet know about.

Conclusion

Foreclosed properties may create significant opportunities; however, there are also serious risks when buying these properties because they are sold on an “as-is” basis. This type of investment is definitely a “buyer be aware” opportunity. It can be lucrative, yet investors need to be careful as well.

If you are interested in trying to find a foreclosed property, be sure to contact your trusted real estate professional for assistance.

When a homeowner stops making regular mortgage payments, the bank can foreclose on the property. This means that the bank takes possession of the property in an attempt to recover the debt the homeowner owes. In some cases, the bank may try to recover this debt by selling the property at auction. In other cases, the bank will simply list the foreclosed home for sale.

Choosing to purchase a foreclosed home has both advantages and disadvantages for the buyer. Weighing these advantages and disadvantages carefully is essential.

Pros Of Buying A Foreclosure

When you decide to buy a foreclosure, you will be working with a seller that is inherently more motivated. The longer the bank owns the property, the more money they lose. For this reason, banks are often more willing to negotiate on all of the terms of the sale, including the price, closing costs and other important factors.

Buying a foreclosure also ensures that you are getting a house that is already vacant, so you can move in whenever you are ready. In addition, you can be sure that the title on the home is clear.

In most cases, you will be able to finance a bank-owned foreclosure with a mortgage, and you will be able to obtain an inspection if you want one.

Cons Of Buying A Foreclosure

Buying a foreclosure also comes with disadvantages. For example, banks usually require additional paperwork when you are purchasing a foreclosed home.

In addition, most banks will refuse to complete any repairs on the home before the purchase. Most foreclosed homes are sold as-is, which means you may have to repair some problems or do some updates after you buy the home.

Finally, because the bank has only owned the home a short time, they cannot provide comprehensive disclosures related to the property’s current condition or history. This means that you may end up purchasing a home without being fully aware of the problems you’ll need to address.

Making A Choice

Buying a foreclosure isn’t the right option for every buyer. However, if you are a careful shopper, potential benefits are available.

Before making an offer on a foreclosed home, be sure to consult an experienced real estate agent. These professionals are well-versed in negotiation and can prove to be one of your most valued assets in your home-buying experience.

If you’re looking to get an untraditional deal on a new home purchase, you may encounter either a short sale or a foreclosure. These two terms refer to sales that are not usual. As a homebuyer, it’s important to understand the differences between them and how each one might affect your buying experience.

What’s A Short Sale?

A short sale is a situation where the owner has a strong motivation to hurry up and sell their home. In so doing, they’re willing to sell for less than what they owe on the house. Homeowners have a variety of reasons why they might do a short sale. Their reasons might include a personal emergency, or they might be trying to protect themselves against a future foreclosure.

In a short sale, the owner’s lender has to be apprised of the plan. In many cases, the lender is supportive of the short sale, since it keeps them from having to go through the long and expensive process of a foreclosure.

Short sales can represent great deals for buyers. However, since this type of sale is so unusual, the process of buying often takes a much longer time than a regular home purchase. You’ll need to be patient, but if the sale does go through, your patience can pay off.

What’s A Foreclosure?

A foreclosure is a situation where the owner’s lender is forcing the sale of the property due to unpaid mortgage payments. The lender is essentially taking back ownership of the property. The bank then puts the home up for sale as a foreclosure, and is the official seller of the property.

A foreclosure property may offer a good deal for a buyer, but the process may be long and drawn-out. Since the seller is the lender, they are not in any particular hurry to sell a property, and the transaction can be very complicated.

If you’re interested in buying a short sale or a foreclosure, you should look for a real estate agent that specializes in these types of transactions. Your real estate agent can help you to successfully navigate through all the red tape that short sales and foreclosures inherently have.  

Buying a foreclosed home is easy, right? After all, they sell for pennies on the dollar, right? Well, that could be a false assumption. Buying a foreclosed property appears easy on TV, but in reality, it can be overwhelming. 

Foreclosure sales continue to decline in the market from 38.6 percent in 2011 to 14 percent in 2017 but ticking up a bit in 2018 according to Attom Data Solutions, a national property data company. As foreclosure sales drop, competition for these properties become stiffer and more complex. And as home prices increase in most cities, buyers often turn to foreclosures as affordable alternatives for landing their dream home

Foreclosures usually occur when homeowners can no longer pay their mortgages and the mortgagees seize the properties. Once former owners vacate the properties, lenders typically put it on sale at discounted price or auction to the highest bidder. 

Foreclosures give homebuyers the opportunity to get great deals. While foreclosures can save you thousands of dollars, it may come with risks. Having a stomach of steel can help when pursuing a foreclosure.  

To mitigate the risks involved, keep the following hacks and tricks in mind.  

Budget Carefully 

Don’t allow a small price tag to entice you into a quick deal. Ask yourself the following:

• Do you have sufficient dollars for extensive repairs? 
• Do you have a team ready for any required repairs or are you handy at doing them yourself? 
• Can you find a tenant if you intend to rent?

If you conduct thorough research, you’ll minimize the risks. 

Get A Home Inspection 

Though foreclosures are usually sold “as is”, you need to know the property deficiencies. The home seller can allow you to bring in a competent home inspector. Your inspector will give you a list of what the property lacks and the cost estimates needed to complete the renovations. You may even want to hire a home inspector after purchasing a foreclosure just to get a thorough review of the property.

Ask For Vacancy Duration  

Ask how long the house remained vacant. In most cases, long vacancy means more damages. For example, plumbing seals may dry out, bugs get into the house and sewer gases back up. 

Don’t Ignore The Landscaping 

Neglected landscaping contribute to house deterioration. Tree seedlings grow roots into the foundation and vines crawl into the windows. Small trees can also mess up pavers, and dead branches can break and crash into the house.  

Be Cautious With Auctions 

Although auctions are common with foreclosures, it’s best to avoid them. And if you can’t, be vigilant when bidding. Competitive bidding can raise the value so high that you end up losing money after the cost of repairs. 

It’s always best to work with your trusted local real estate professional to find foreclosure properties. They are experienced in determining the quality of the properties and can help you through the tenuous foreclosure purchase process.

Buying a property out of foreclosure can be a very smart move, financially. But it can also be complicated, expensive, and stressful.

Here are 5 things to keep in mind before you take a first step in that direction:

Cash Or Preapproval Required

Buying a house that has been returned to the lender through foreclosure means dealing with bureaucracy rather than with a motivated seller. Large lenders are notorious for taking their time to approve a contract, even if the offer is for the exact amount specified.

Then there’s the paperwork, which can seem endless. Most lenders require that prospective buyers have cash on hand, or a pre-authorized loan in place in order to even submit an offer. 

There’s Little Room For Negotiation

Although in certain circumstances there may be an opportunity for some discussion about the price, that is not the norm in a foreclosure. The minimum price is usually written in stone, even during an on-site property auction, and the only direction is up! The days of buying foreclosures for a song are long past, if indeed they ever really existed. 

As-Is Condition Means Just That

Some buyers specialize in foreclosures while other investors run the other direction. There are pros and cons, of course, to every transaction. Sage advice is to always pay the fee for a property inspection on a foreclosed property, even if you have experience. A third-party evaluation is especially valuable if the home has been vacant for an extended period of time, if the utilities have been turned off, or if there are extensive visible defects.

Foreclosures can be like icebergs: What you see may be nothing compared to what lies below the surface. Also, with the findings in writing, always confirm that your loan commitment and insurance quotes will be honored in spite of the existing condition.

The Need For An Experienced REALTOR

Navigating the landscape of property foreclosures is a specialty field, and caution is the name of the game. As a prospective buyer of a pre-foreclosure, a short-sale or a foreclosed home, an experienced REALTOR is your best resource. A real estate professional will help you deal with all timelines and requirements, and has the knowledge and expertise to recommend lenders, inspectors, insurance agents and contractors to help you make a decision.

Always Consider Future Value

Although the initial price might be right, there are additional variables at play in every real estate transaction. What can you expect in terms of appreciation over the short term? What is the long-term outlook for the neighborhood? Will needed repairs and improvements add to the home’s value, or simply bring its condition up to standard? Do you plan to live in the home, or is it strictly for resale?

Your trusted real estate professional is the best resource to help you thoroughly evaluate all the information about every foreclosure.