Working Home Auctions – How to Get the Home You Want

Working Home Auctions - How to Get the Home You Want- 150x150Buying a home at a real estate auction can prove to be very profitable, if done right. Home auctions have become a very popular way of buying and selling quicker than through the regular process. Auctions attract plenty of home buyers and investors who are looking to get a good deal, and can also be a great opportunity for sellers who need to make a quick sale.

Home auctions are conducted by government agencies or specialized firms who act as an intermediary between the buyer and the seller, making it unnecessary for a real estate agent to represent you. Homes bought at real estate auctions have the potential of being the best real estate deals you can find, but they are also the riskiest way of buying a home. Properties can be bought with discounts of up to 70 percent of their housing market value, but there is also the possibility of ending up with a property that will cost you more than the market value because you have to invest significantly into repairs.

The Home Auction Process

There are three types of auctions used to sell homes. One type is the absolute auction, in which the buyer who offers the largest amount of money gets to buy the property. The sale is guaranteed at an absolute auction, so this will attract a large number of home buyers and investors. Another type of auction is the one who uses a minimum bid, minimizing the seller’s risk. The third type of auction is the one where a reserve can be used, allowing the seller to accept or refuse an offer, based on the amount offered. This way, the seller has more control over the selling price, but the auction won’t attract as many potential buyers.

Home auctions are normally held by professional auction firms. In order to recuperate some of the taxes and cost of maintaining foreclosed properties, the auctions are also hosted by banks or government agencies. Auction companies can organize auctions for real estate agents, banks, or individuals who want to sell quicker than it would normally take to sell a home. The auction organizer will normally receive a small percent of the final sale price.

Buyers who take part in a home auction have a chance of making a great deal, and purchasing a home at a price much lower than market value. Another benefit is that there is very little negotiation involved, and the whole purchase time is a lot lower than when buying a home the conventional way. The seller also has the advantage of selling his or her property a lot faster than by going through the regular home selling process. All the people who attend the home auction are potential buyers and, because homes are sold “as is”, the seller isn’t required to make appointments and show the home.

Steps to Making Sure that You Get the Home You Want

Doing your homework before attending a home auction and researching the properties that are being sold can make the difference between getting the home that you want and ending up with a home that is not what you were looking for. Also, because the homes are sold “as is”, doing some prior research will ensure that you don’t have to pay a fortune in repairs after you have bought the home. Here are some steps to follow when buying a home at a real estate auction:

  • Make sure you have financing readily available before attending the auction. By doing this, you will know exactly how much you can spend, helping you narrow down the properties that you can bid on.
  • Find a home that meets your criteria. Obtain a list of all the auctioned properties and research them until you find something that meets your needs. If you’re not familiar with how to evaluate a home and estimate repair costs, then hiring a professional is something that will probably save you a lot of money.
  • Inspect the home before bidding. The description in the auction catalog might not be too accurate, so visiting the property and seeing it with your own eyes is always a better choice. You can also talk to the owners if they are willing to answer some of your questions.
  • Check for second mortgages and if taxes are owed on the property. The IRS can seize a property even after the auction sale was completed, if there are any taxes owed by the previous owners.
  • Bring with you the amount of money that you will have to put down as deposit. Most auctions require a $10,000 or a 10 percent deposit, which is nonrefundable.
  • If everything goes smoothly and your bid wins, you will have to sign a purchase contract and a bid confirmation. Within 30 days of winning the auction, the closing will take place and the property title will be transferred from the seller to you.

Home auctions provide an excellent opportunity for finding a great investment property or a home for yourself at a great price. But before attending such an event, you will have to make sure you understand the process of buying a home through a home auction, and what risks this involves. If you have done your homework, you will find that home auctions provide great advantages for all parties involved, giving you the chance of becoming a home buyer quicker and for less money.

The Three Techniques You Need to Master in Real Estate Investing

The Three Techniques You Need to Master in Real Estate Investing- 150x150Many industries have suffered due to the recent economic recession and are currently slowly recovering. One of these industries is real estate, which is not as profitable as it once was, but remains an attractive industry for investors. Real estate, like many other industries, has recently started to show improvement, and it looks like it will keep improving over the next years.

For someone with less experience and knowledge, real estate may seem like a pretty difficult industry to invest in, especially during these times. Fortunately, by learning a few techniques, any investor who possesses the right determination can make it in this business. In this article you will find the three main techniques that you need to master in real estate investing.

Technique Number 1: Find Rent-to-Own Homes for Home Buyers

A good alternative for people who are unable to get approved for a mortgage loan is the lease purchase. This gives the tenant the option of buying the home that he is renting, but at a later date.

A fairly large number of potential home buyers are unable to obtain a mortgage loan, due to loan requirements becoming stricter. This has created a large number of people and families who are renting because they have no other choice. Lease purchase gives them the option of purchasing the rental before the lease term is up, and even the possibility of allowing part of each rent payment to go towards the purchase price. This is a great opportunity for those who are unable to get mortgage financing, and for the real estate investor.

Because of the housing market being in recovery, you have a significant number of homes that won’t sell because sellers won’t budge on the price. Additionally, there are a significant number of people looking to buy, but can’t qualify for loans. In order to make a profit, you must find a seller willing to agree to a lease purchase option, and then find him a tenant buyer. Bringing the two together will resolve both their problems and get you a nice commission. Because both the seller and the buyer are motivated to move quickly, the transaction shouldn’t take more than a few weeks to finish.

Technique Number 2: Investing in Foreclosures

You could make huge profits from investing in foreclosures, but if you don’t have the proper knowledge, a single bad investment can wipe out all of your capital, along with ambition to invest in real estate.

There are three ways in which you can buy homes in foreclosure: pre-foreclosure, at the auction, or buying from the lender after the foreclosure. Buying a foreclosed property from the lender after the auction is referred to as buying REOs (real estate owned), and it’s the less risky option of the three. The next riskiest time to purchase a property is pre-foreclosure, because the home can have many issues that the seller didn’t disclose. The riskiest purchase is buying a foreclosed property at the auction. You won’t receive any warranty or guarantees that the home is free of any outstanding liens or loans.

The best way to buy a foreclosed property is to find a good REO agent that has the necessary experience to make sure that the transaction goes smoothly and you get a good deal. Sometimes, real estate agents who are specialized in REOs have a few foreclosure listings that need to be sold fast, so they will be searching for an investor who can make the purchase quickly. If you have good relationships with a real estate agent, the first person he calls could be you, helping you secure a good deal in a short time.

Technique Number 3 – Buying Short Sale Properties

Many home owners who have found themselves underwater on mortgage loans might require a short sale. This is a great opportunity for the real estate investor to make some serious profit.

You can negotiate a good price with the homeowner or with the short sale lender, buy the home, and then flip it for a profit. Like in the case of foreclosure investing, finding a good real estate agent can make a huge difference. The agent can locate properties for you, help you with your investment plan, and help you negotiate a better price.

These three real estate investing techniques can make you very successful if you use them wisely. You must remember that not all properties that seem like a good deal are worth investing in. Familiarize yourself with these techniques, with the investing process, and don’t be afraid to consult a real estate agent. Even if you have done your homework, agents have the necessary relationships to help you find great deals faster than other investors, and get you one step closer to becoming a great real estate investor.

Investing in Distressed Property and Foreclosures? Here’s Advice from the Experts

Distressed Property and Foreclosures- Expert Advice in Investing-150x150Foreclosed and distressed properties are a good real estate investment because their price is usually significantly below market value. When the owner of such a property defaults on their mortgage payments, the property goes into foreclosure and the bank or debt collector starts the selling process in order to collect the mortgage payment.

One third of all the homes sold between 2008 and 2011 were foreclosed and distressed. These properties are listed for prices 40-60% off their initial market value, and are a good deal for real estate investors. However, the possibility of making a profit with these properties will attract a lot of investors, so you will most likely have to win a bidding war before you can purchase a distressed or foreclosed property. Another issue that you may encounter is that foreclosed and distressed properties will usually need to be repaired before they are resold. Here are the top 10 tips for investing in distressed and foreclosed properties.

Top 10 Tips

1. Get pre-qualified for a loan. Unless you have enough cash to buy a property, you will need to take out a loan. Lenders will only consider serious offers, and you might not be able to bid on a property if you are not pre-qualified for a loan. However, if the home is too damaged, lenders might refuse to give you the loan, which means that you will have to take out another loan for repairs, or invest some of your own cash.

2. Research the area. Buying a nice home in a bad neighborhood is not a great idea. If the surrounding properties are in bad shape, they will most likely drive down the value of your investment. On the other hand, buying a damaged home in an upscale neighborhood will bring up the value of your investment. Renovating the home will also increase its value.

3. Have a professional home inspection. Foreclosed and distressed homes are sold “as-is”, making a professional home inspection a very important part of buying a property. Once the sale contract is signed, you will be responsible for any damage that the home might have. Besides giving you a clear picture of what shape the home is in, the professional inspection will also give you an estimate of how much it will cost you to renovate.

4. Be ready to make some repairs. Many times, when previous owners are evicted, they do intentional damage to the property. After the housing market crashed a few years ago, many people left their homes in a deplorable state, while others even stole kitchen appliances or light fixtures. Another thing that can happen to a home if the previous owners have been evicted is that it can become an easy target for vandalism.

5. Advertise. In order to find good deals on properties that are facing foreclosure, you need to advertise to their owners. A good idea would be to use bandit signs in areas with a high foreclosure rate. Another thing you can do is post classified ads in local newspapers, or on local websites. This way, you will find desperate sellers, and not be restricted to bidding on properties that your competition will also be bidding on.

6. Buy from people who are forced to sell. Buying from a seller who is only thinking of selling won’t guarantee a good deal. But buying from someone who is forced to sell because they are facing foreclosure or have other issues will most likely get you a good price.

7. Be careful when making estimates. Especially if you plan on remodeling or renovating a home before reselling it, be very careful when estimating how much money you will have to invest in the repairs and improvements. A small mistake when estimating these costs can become very expensive for you, and you might end up with a home that is hard to sell.

8. Contact lenders directly. Not every foreclosed or distressed property will be listed publicly, and some may be outdated. By contacting lenders directly and finding out if there are any foreclosed homes in the area, you could even find properties that are not yet listed, which gives you the advantage of being the first one to negotiate their price.

9. Make serious offers. While lenders and owners are in a position where they want to sell the distressed property as quickly as possible, making an offer that is too low won’t work. The home’s price will most likely be based on other sales for similar properties in the same area, so researching other sales should give you a good idea of how much you should offer.

10. Know the law. Many states have laws regarding foreclosure, made to help the home owner. In some states it takes up to 12 months for the foreclosure process to end, so make sure you know the laws before you make a purchase and find that you have to wait months before actually getting possession of the property.

When investing in foreclosed and distressed properties it is important to act fast, know what you want and, most importantly, have knowledge of the foreclosure process. Arming yourself with these top 10 tips will increase your chances of making a good investment, whether you are just starting out or you are a seasoned investor.

Life After Foreclosure: Your Future in Home Ownership Revealed

Life After Foreclosure- Your Future in Home Ownership Revealed- 150x150Losing a home to foreclosure is a very stressful and discouraging experience which may have a negative influence on one’s desire to own another home. Fortunately, a foreclosure is not the end of the world, and it doesn’t mean that you can never own a home. Depending on the circumstances of your foreclosure, it’s just a matter of time before you will be able to apply for a new mortgage.

When Can You Apply for a New Mortgage?

Normally, you have to wait seven years after the foreclosure to buy another home. This is the period of time that is required by the government-endorsed organization Fannie Mae, a company that has purchased a large number of mortgages in the United States. The foreclosure remains on your credit report for seven years, but even after that you will need a good credit score in order to secure another mortgage loan.

If your foreclosure was caused by extenuating circumstances, like losing your job, a significant pay decrease, or illness, the period of time before you can reapply for a mortgage loan is reduced to three years. Extenuating circumstances are events that are beyond your control and must be properly documented.

Another possibility is that some lenders will be willing to give you a new mortgage loan right away. Unfortunately, the new mortgage loan will probably require you to pay a very large down payment and high interest rates.

How Can You Improve Your Credit Score?

Defaulting on your mortgage will have serious repercussions on your credit score. The foreclosure will show up on your credit report for seven years, but you should start rebuilding your credit score right away. If the foreclosure is the only negative event on your credit report, then you can rehabilitate your credit score in as little as two years.

In order to start increasing your credit score you will need a credit card that you will use to pay for your purchases. On-time payments will reflect on your credit report when the time to apply for a new mortgage loan comes. It is important to make sure that all three credit agencies record your payments on a monthly basis.

The housing market crash has left many Americans with no other options than finding a place to rent. Fortunately, recovering from a foreclosure is not as hard as it seems, it just takes a while. Rebuilding your credit and regaining the lenders’ trust can help you get a new mortgage loan in only a few years. Foreclosure is a scary and depressing process, but, through a little research and a lot of determination, you can quickly get back on track and become a home owner again.


How These Alternatives Can Help You Avoid Foreclosure

How These Alternatives Can Help You Avoid Foreclosure- 150x150Going into foreclosure can happen for various reasons, such as money problems, divorce, or job loss, and it is never a pleasant experience. However, there are several alternatives that can help you avoid foreclosure, and they are generally considered a better substitute to losing your home.

What is Foreclosure?

Foreclosure happens when a borrower cannot make monthly payments on his or her mortgage loan anymore. This leads to the property being taken by the bank and sold.

Foreclosure involves several stages: after 3 to 6 months of missed mortgage payments, the lender notifies the borrower that he or she is facing foreclosure. This is done through a Notice of Default. A reinstatement period begins, in which the borrower has a chance to correct the default. If the borrower can’t correct the default, he or she will receive a Notice of Sale and the property is listed in a public auction. The winner of the auction will gain possession of the borrower’s property.

Alternatives to Foreclosure

Before you give up and accept that you are going to lose your home, you should know that there are alternatives to foreclosure. In order to determine what your best alternative is, you must discuss this with your lender. By contacting your lender as early as possible, you will have access to more options. Here are some of the alternatives to foreclosure that you could take advantage of:

  • Bankruptcy. Bankruptcy offers individuals the chance of a fresh start by forgiving debts that they are unable to pay, while giving lenders the chance to recover some of their losses through the debtor’s assets. Bankruptcy can become a very expensive process, and it’s recommended that you consult a professional before choosing this option.
  • Reinstatement. If you are able to repay the missed monthly payments, you could make your mortgage loan current, which will help you avoid foreclosure. This alternative is valuable if you use it early on, because you won’t have that many missed payments. Reinstatement can be very helpful if you are recovering from a short-term money problem, and can show the lender that you can repay what you owe and start making monthly payments on time. Be aware that you will most likely have to pay late charges and penalties.
  • Refinancing. Refinancing may be able to reduce your monthly payments by securing a lower interest rate than your current mortgage rate. You are required to be current on your monthly payments and have a fairly acceptable credit score in order to qualify for refinancing. You may also be able to qualify for refinancing through the Home Affordable Refinance Program (HARP).
  • Forbearance. When facing money problems, your lender is able to grant you a “forbearance,” meaning that your monthly payments will be put on hold for up to 6 months, giving you time to get back on your feet. In many cases, forbearance is combined with reinstatement, in order for you to pay the missed monthly payments on your loan, once your financial situation has improved. Forbearance may be extended for another 6 months in case you are unemployed.
  • Repayment plan. If you are a few months behind on your mortgage payments, you may also qualify for a repayment plan. The missed payments and late fees are combined with your regular monthly payments. However, you must be able to prove to your lender that you can afford to pay the past due amounts, and start making monthly payments on time.
  • Short sale. When selling your home through a short sale, the property is put up for sale, and sold for a price that is less than what you owe to your lender. After the sale is completed, you will have to negotiate with your lender to accept the sale price as payment in full. This option will still damage your credit, but, if you are successful in convincing the lender to accept it, you won’t owe anything anymore, unlike foreclosure.
  • Renting. While this option has nothing to do with your lender, you will need to rent the property for an amount that will cover your monthly mortgage loan payment.

Almost all of these options will affect your credit negatively, and are not ideal, but they are better alternatives than losing your home. But this doesn’t mean that you should just go ahead and pick one blindly, without knowing what it involves. Having knowledge about all of the alternatives that are available, how they work, and how they will impact you, is very important and should be thoroughly researched.

Insider Buying for Bank-Owned and MLS Properties

Q&A- Insider Buying for Bank-Owned and MLS Properties- 150x150Question: How much of an insider do I have to be to buy bank-owned properties before anyone else gets to see them?

I see properties on MLS (multiple listing services) for one day that are already under contract- what gives?

Answer: For those that have missed out on real estate deals because they were on the ‘outside’, it is understandably frustrating. If you know these tips, you’ll be an insider and get the deals you’re after!

Insider Buying Tips for Bank-Owned Properties

Bank-owned properties are often some of the best deals in real estate investment. But many investors complain that they find it very hard to land a deal because it’s already gone before they know about it. One secret to sealing a bank-owned property deal is to find a realtor that can assist you and give you much needed insight.

These are the three avenues for getting bank-owned real estate investment deals:

  • Pre-foreclosure period- this is the time when the bank begins issuing warnings to a defaulting homeowner. Having close communication with the bank’s agent can help you keep tabs on the process so that you’ll be one of the first to know when the home is available.
  • Auction time- you should be the first one to arrive each time an auction of foreclosed homes is announced. At this time you can buy the property at the lowest cost. If a proper buyer isn’t found, it will be listed as bank-owned property.
  • Bank-owned real estate listings- most people wait for this stage, but you will often find that the best deals have already been snapped up in earlier stages. However, you can still land a great deal if you check the listings regularly. You should also be on the lookout for publications on foreclosed properties so that you can keep updated on newly listed properties and ones that have recently come back up for grabs.

The best resource for foreclosure listings is the internet. Check the bank’s official websites for listings regularly. Consider establishing contact with a bank-owned property real estate agent to advise you accordingly on the best deals. The agent will also help you make an offer to the bank that they will hopefully find “too good” to reject.

Insider Buying Tips for MLS Properties

Many residential real estate investment deals are gone before they are ever listed on a public MLS. Expert RE investors say that this happens because real estate agents often pocket these listings and then hold off from listing them. Despite this happening, many others are still able to land great real estate deals from MLS. Since not all of us are RE brokers, here is some insight into getting these deals.

You need to look for the owners rather than the deals, and focus on those owners who need to sell rather than those who want to sell. Typically, real estate owners who are willing to sell their property at 60 percent or less of its original value never get a chance to list it because it is sold immediately.

You also need to know exact keywords to search for that will generate targeted search results of the best deals. Some great keywords for MLS include: tenant occupied, estate sale, military family, needs work, must sell, vacant, third-party approval required and fixer-upper among others.

Finding a motivated seller often means more savings for the buyer. As a simple tip to keep in mind, remember that the longer a property has stayed on MLS, the more motivated the seller will be.



Is Demand Being Met for New Houses?

Demand for New Homes Not Met By Slow Home Building Industry-150x150The economic crisis has resulted in home builders losing more than 70 percent of their business. Over the past few years, the American housing market has suffered the most severe downfall since the Great Depression of the 1930s. The housing decline affected both investors who could no longer buy and sell houses for a quick profit, but also families who couldn’t afford to pay their mortgages anymore. This resulted in a lot of people losing their homes, and banks losing money. Families couldn’t afford mortgage payments anymore, or simply chose to walk away from their mortgage because their home was now worth much less than the mortgage value. As a result, the market was flooded with low priced houses, which caused the growth of new home building to slow down a lot, putting many home builders out of business.

Demand for New Homes

Across the United States, the number of houses for sale is at its lowest since 1999. This is due to the fact that new construction has been very slow for the past few years, and investors have bought many of the foreclosed homes. The steady job growth that the United States is experiencing lately resulted in more families looking for a home, many of them looking for new constructions.

Often owners who put their homes up for sale receive a few offers within a couple of days after the listing, so many people decide to not list their home yet, because they fear it will be sold before they even have a chance to buy a new one. This all contributes to the rise in demand for new houses.

The Slow Home Building Industry

The increase in demand for new houses is, for many builders, the sign that it is time to get back to work. Unfortunately, most home builders are not yet ready to start work again.

Many workers have left their construction jobs and started working in other industries. Because the housing market just recently started recovering, it is hard to bring the workers back and offer them a good salary. As a result, the time needed, as well as the cost of building a new house, has increased.

The most affected home builders are the ones in areas of the United States that were hit the hardest by foreclosures. A lot of distressed properties are still available on the market in those areas, which makes the demand for new homes lower than in other parts of the country.

Another problem that the home building industry faces is that small home builders, who far outnumber large public home builders, will find it hard to recover after years of low demand. Unlike large developers, they will have to borrow money in order to buy a developed lot, which puts them at a large disadvantage. Fortunately,  job growth has created significant demand for new homes from people who want to live close to their work place. This would be a great niche for small builders, because big developers will regard it as not profitable enough, and prefer to build more homes at a time elsewhere.

While the demand for new houses has not yet been met by the home building industry, we must keep in mind that the housing market was hit very hard by the economic recession. It will be a while until builders fully recover, but improvements can already be seen and, hopefully, the buyers’ demand for new houses will be met in the near future.

California’s Homeowner Bill of Rights

Q&A-California's Homeowner Bill of Rights-150x150Question: What are the most important aspects of California’s Homeowner Bill of Rights?

Answer: On January 1, 2013, the California Homeowner Bill of Rights became a law. It was designed to protect the rights of mortgage consumers that have long been needed for quite some time. Its provisions are designed to guarantee transparency and fairness to homeowners especially during foreclosure. The most important aspects of the bill include:

Important Aspects of the Bill

  • Tenant Rights- The purchaser of a foreclosed home is required to give a tenant at least 90 days before instituting eviction proceedings. The owner is obliged to honor the lease in case the tenant has a fixed-term lease that became active before title transfer during foreclosure. This notice, however, may not apply if the owner proves that exceptions intended to prevent a fraudulent lease apply.
  • Enforceability- Borrowers now have the authority to seek redress in case of material violations of the new foreclosure process provisions. A borrower will be entitled to damages after a sale and injunctive relief prior to a foreclosure.
  • Verification of Documents- Lenders who record and file unverified documents will be charged a penalty of $7,500 per loan in an action instituted by the civil prosecutor. Such lenders may also face litigation from the Departments of Corporations, Financial Institutions and Real Estate.
  • A Guaranteed Single Point of Contact- Under this bill of rights, homeowners are guaranteed a single point of contact, a specified team at the bank or person who is familiar with the facts of their case as they try to maintain their homes. This makes access to paperwork and an application for a mortgage loan modification very easy.
  • Dual Track Foreclosure Restriction- The California Homeowner Bill of Rights restricts mortgage servicers from starting the process of foreclosure when the homeowner in question is seeking a loan modification. If a homeowner has applied for loan modification, the foreclosure process will not proceed until the application has been reviewed.
  • Blight Curbing Tools- The bill has given receivers and local governments more tools to enable them to fight the blight caused by vacant homes in the neighborhood. This is aimed at ensuring that foreclosed homeowners are compelled to pay for the required upkeep in case they violate provisions of the mortgage code.
  • Mortgage Fraud Prosecution Tools- The bill has given the Attorney General the power to prosecute complex mortgage related crimes between 1 and 3 years. The AG’s office will be using a grand jury to investigate, prosecute and indict financial crime perpetrators.


The Foreclosure Process

foreclosure2-150x150Have you experienced financial difficulties to the point of not being able to make payments on your mortgage? These things happen, and while they are less than ideal, there are always solutions. Often times you will be given a grace period to try and sort through your payments. If this doesn’t work, a short-sale will probably be your next option.  Foreclosure will most likely be one of your last options- read on to learn what a foreclosure is and how it works.

What is a Foreclosure?

A foreclosure is the process by which a homeowner’s property rights are forfeited as a result of failing to pay the balance on a mortgage loan. A foreclosure is generally a last resort whose need arises when you are unable to short sell your house or pay the outstanding debt through any other means. Normally, it will be sold through a foreclosure auction. In case a sale isn’t made through the auction, the ownership of the home reverts to the lender.

When taking out a mortgage, the borrower signs a deed of trust that puts a lien on the acquired property. This makes the loan secured, so ownership can legally revert to the lender in case the borrower fails to make payments on the property on time. If a lender does not ask for any collateral, then this becomes an unsecured loan. The lender of an unsecured loan can take you to court in case of default but he cannot forcefully collect any money from you.

Most lenders prefer a secured loan because if you default on the payments, the lender can seize your property and recover the balance owed.

The Foreclosure Process

There are five major steps in the foreclosure process, including:

1.    Notice of missed payments

It is always expected that you make payments on time. However, the lender, in most cases, will allow a 10-day grace period. If you don’t make the payment after these 10 days then the lender will issue you with a notice of a missed payment. This notice asks you to send the payment ASAP to avoid legal action. If you happen to send the payment to the lender after issuance of this notice, then you may only suffer a penalty and negative feedback on your credit report.

2.    Notice of default

If you fail to make a payment for a period of more than 30 days, the lender will issue you with a notice of default. This is a silent way of telling you to pay up or a different action will follow. The notice of default includes information about the property, your name, the amount that you owe the lender, the number of days that have passed since the payment was due and a detailed statement outlining the terms and conditions of the mortgage that you signed with reference to payment timelines. Depending on the terms of the lender, the notice of default may explain that further measures will be taken if an action is not taken by the borrower. While some notices of default are friendly, others can be quite harsh. The most common action after a notice of default is a foreclosure.

3.    Foreclosure notice

A foreclosure notice follows if you don’t respond to the notice of default in a manner that convinces the lender you will pay. The foreclosure notice tells you that the bank is on the verge of initiating foreclosure proceedings. Depending on your location, you have 30-120 days to work a deal with the lender through a short sale. If the borrower pays off the balance on the mortgage then the foreclosure is dismissed. However, foreclosure commences if you fail to make the payments. The notice includes the amount due, the interest rate, the name of the lender and the contact information of the lender’s attorney.

4.    Auction

When the default has not been remedied at the end of the set timeline, the lender will proceed to sell your property through a foreclosure auction or a trustee sale. The auction can take place at the county courthouse, at a convention center, at the office of the trustee or at the scene of the property itself. The property is sold to the highest bidder at the fall of the hammer. Since many people don’t manage to pay cash on the spot, the bank and the highest bidder may enter a deed of lieu for foreclosure. In other cases, the lender may buy the property back.

5.    Post-foreclosure

If the auction is not successful then the ownership of the property reverts back to the lender. This is referred to as real estate owned or bank-owned property. Such properties can be sold either through a local real estate agent or in the open market. Other lenders may prefer to sell their property at liquidation auctions, convention centers, or in auction houses.

A foreclosure is a last-resort option only when all other of the other options have failed. It has the disadvantage of hurting your credit score for a period of at least 7 years and will make it difficult to deal with future mortgage loans. Be sure to exercise all of your options before resorting to a foreclosure. If you do end up with a foreclosure, stay positive as there is always light at the end of a tunnel. Your credit will eventually bounce back and you will be able to learn from the past and move ahead. Here are some other resources that may help you in periods during and after financial issues: Top 6 Mortgage Lenders for Borrowers with Bad Credit, Improve Your FICO Credit Score, and Top 10 Steps for Getting a Post-Bankruptcy Loan.



How a Short Sale Works

ShortSale-150x150If you owe more on your mortgage than the current value of your house, then you may want to look into a short sale as an option. When you are having financial problems and you want to try avoiding a foreclosure, the alternative is a short sale. Unfortunately for either option, the consequences are grave: destruction of your credit score, loss of personal dignity, and possibly embarrassment for your family members. Sometimes this is your only option so you just have to proceed and push through the discomfort of the situation.

All About Short Sales

Many realtors are reporting that they are having more short sales compared to any other sales in the last 5 years. This sad fact highlights the depressed economy and the many Americans struggling with debt. Even non-delinquent sellers are qualifying for short sales these days.

When a lender agrees to a real estate short sale, the lender is basically accepting an amount less than the total due. But not all lenders accept discounted payoffs or short sales, especially when a foreclosure will mean more financial recovery for them. It is also important to note that not all properties or sellers qualify for a short sale arrangement.

Honestly speaking, there are some drawbacks to short sales with the parties involved. All borrowers are advised to:

  • Know the type of loan involved. This influences flexibility in negotiating for an offer.
  • Seek legal advice. Find a competent and registered real estate lawyer in your state.
  • Find out about taxes. Ask an accountant about taxes associated with short sale transactions.
  • Meet deadlines. Be aware of all of the deadlines and stay on top of them. Not following the timeline could potentially ruin a short sale, so it is important to stick to dates throughout the process.

According to the Mortgage Forgiveness Act of 2007, the IRS will not consider debt forgiveness as income per se. There is no guarantee as to whether a lender that accepts a short sale will legally pursue the borrower for the difference unpaid. This amount is referred to as a deficiency in some states. Given the prevailing laws, a lawyer may be required to determine whether you actually qualify for a claim or deficiency judgment.

Steps to a Short Sale

1.    Contact the lender.
Before finding a short sale specialist, you will have to make several calls in order to find the right person. You will hopefully be able to establish rapport with the lender and make sure that the lender has you in their best interest.
2.    Submit a letter of authorization.
Lender etiquette says not to disclose any personal information about their clients unless there is express permission to do so in writing. It would be much better if you directly speak to the lender and endorse the lawyer or agent representing you. This letter contains your name, the loan reference number, the property address, the date, the name of your agent and their contact details.
3.    Prepare the net sheet.
A net sheet is an estimated closing statement which indicates the selling price that is expected along with the costs of sale, outstanding payments, unpaid balances, and any real estate commissions. You don’t have to stress remembering every detail in preparing this because your lawyer or agent should be able to do this on your behalf. If the net figure indicates some cash then you may discover that you don’t really need a short sale.
4.    Obtain a hardship letter.
This letter is meant to hit the nail on the head. It clearly describes what happened that led you to your financial disability. In this letter, you are pleading with the lender to accept less than the amount due. You need to explain that you were ill, lost your job or had your family involved in an accident. However, you must be honest because criminal behavior and dishonesty may only lead to prosecution.
5.    Provide proof of assets and income
Honesty about your income and assets is paramount in one’s attempt at a successful short sale. You should clearly relay information pertaining to your negotiable instruments, real estate property, money market accounts, savings accounts, and stocks to the lender. This is considered assurance that you will not be able to repay.
6.    Provide bank statements.
The lender wants to be convinced of your financial misfortunes by all means. That’s why you need to explain any unaccountable deposits, unusual number of checks or huge cash withdrawals on your bank statement. This will enable the lender to determine whether any deposits will actually continue.
7.    Conduct a comparative market analysis.
A comparative market analysis enables you to substantiate that the value of your property has dropped because of a market decline. It should indicate the prices of similar homes that have been sold in the past 6 months, the ones being sold currently and any pending sales. Your agent can prepare this document on your behalf.
8.    Strike a purchase agreement.
If you come to an agreement for selling, then you should provide the lender with a copy of that offer. If you had listed it, then the listing agreement should be there too. However, the lender may refuse to make certain payments such as home protection claims and the cost of inspection on the property.

If all goes well, the lender will most likely approve your bid. You may also request that the lender not report adverse details about you to credit agencies given your present financial difficulty.