Foreclosure Homes - One Way To Buy Them

You have heard about the great deals to be had on foreclosure homes. There may be some truth to the stories, as you will see in this article.

Yes, sometimes you can buy foreclosure homes cheap. But there is a lot of competition in this area, and fewer great deals than “get rich” promoters say.

Some investors have moral qualms about investing in foreclosures. I can’t see what the problem is if you are buying them either at the foreclosure sale, or from the bank afterwards. (Buying before the home is foreclose on, or “pre-foreclosure,” is a whole other matter - and it is best covered as a separate topic). As I once heard a man explain to his son while I repossessed the family car, “If you can’t pay for it, you don’t get to keep it.”

Buying at a foreclosure sale can get complicated if you don’t have the cash to pay for the purchase. You will have to arrange beforehand for financing, and a pre-qualification letter from the bank won’t be enough. Find out exactly what you need before you go to the sale - you may need a certified check from the bank. You don’t want to lose your deposit because you can’t close the purchase fast enough, or your credit line is a little short.

Will you get a great deal? Maybe. The whole area has become more competitive, so don’t count on getting houses at a 25% discount. Also be sure you are clear on what the law says. In some states, the owner may have the right to get the property back if she can come up with the money within a certain amount of time. That means you may not get to keep it, and it also means you may have to wait to resell it.

Buy After The Foreclosure

My personal preference is to wait until all the legal stuff is past, and then buy the foreclosure property from the bank. Banks and finance companies don’t want to own real estate, so they will often sell for less than market value to get rid of property fast. Sometimes they will even sell for less than what is owed on the property. The way they see it is that they are spending money on the home and losing out on potential investments every day their money is tied up in that property.

This is how we bought a home in Montana in 2002. The bank had been holding it for six months or more after foreclosing on the mortgage and taking the house, and they were ready to sell. I believe they sold it to us for less than what was owed on it, but we didn’t ask. We just know that they accepted our offer of $17,500.

You can often find these properties listed with real estate brokers. But if you want to get the jump on the competition, start calling the banks in the area to see what they have in their REO (real estate owned) portfolios. They save the commission if they sell it themselves, so you may get a decent price. Just be aware that it is typical for the banks to sell property “as-is”.

They generally don’t want to fix anything, and may not even know what condition a house is in.

There will be a lot foreclosure homes on the bank’s books in the coming years. Mortgages are being foreclosed on at a record rate every year now. If you want to take advantage of this trend, get to know your bankers, and ask about their foreclosure homes.

Copyright Steve Gillman.

For a Free Real Estate Investing Course, and to see a photo of the home we bought for $17,500, visit: http://www.HousesUnderFiftyThousand.com

By Steven Gillman Published: 4/15/2007

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Common Reasons People Go Into Foreclosure
 by: Lucy Landley

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If a family loses their home in Foreclosure, it is easy to
critically speculate and assume that they must have been
irresponsible with the loan payments or they bought a home
way out of their league. Despite the fact that those are
possible reasons for foreclosure, truth be told that there
are many other reasons people foreclose on a home and many
times it is out of their control. For any reason that a
person or family forecloses on a home, there is always hope
and someone to help. This is why it is necessary for
knowledgeable and equipped investors to be on their toes,
ready to help those in pre-foreclosure or those who already
are in foreclosure. Those who have defaulted on a loan could
have suffered from any of many life changing events, such as
the following:

Divorce. Divorce is a life changing issue and a split in a
household can cause people to lose their home in
foreclosure. A frequently used statistic today is that one
in about every two marriages end in a divorce, and sadly
it’s true. Divorce is undeniably a reality of our society
today. Depending on who keeps the house is the determining
factor of who will take over the monthly dues of the house.
Unless arrangements are made in a prenuptial agreement, it
is not a given who becomes the home proprietor and the legal
process of a divorce takes time. The cost of a divorce
itself can be the main cause of losing a home in
foreclosure. Poor communication in a divorce is a factor
which leads to unintended negligence and defaulted payments
as well. Naturally, there are many different divorce
scenarios that lead to home foreclosure.

Medical Reasons. Unexpected illnesses lead to a surplus of
uninvited bills and many people can’t afford these
expenses or do not have the insurance coverage to save them.
Nobody plans to foreclose on their home, just like they do
not expect to pay thousands of dollars in hospital bills.
Ideally saving money out of each paycheck to cover potential
medical expenses would be great, but that is not always an
option. Many Americans live paycheck to paycheck, barely
making the home loan payment. When a medical emergency
happens within a family, the monthly mortgage payment is put
on the back burner. Reason being that an illness can cause
emotional stress, or disable someone from working (which
leads to the next topic…)

Job Loss. Job loss is a frequent cause of home foreclosure.
The economy strengthens and weakens, and in conjunction with
that the workforce moves up and down in numbers. As the
unemployment rate goes up in a city it is safe to assume
that foreclosure numbers will raise as well. Again, ideally
one might hope to have saved enough money over the years to
cover the home loan, credit card bills, electricity, etc in
the case of job loss. However, this is not a social reality.
The many Americans who have suffered job loss cannot pay
monthly dues and they result with a default home loan, fall
in to debt, and in many cases are foreclosed on by their
mortgage lender.

Death. Death is single handedly the most detrimental
happening for a person or family. Death can, in many ways,
cause a family to lose everything…including their home to
foreclosure. Take for instance, if the sole provider of the
mortgage payments has died, then it is very likely that the
rest of that family will lose their home in foreclosure.
Unfortunately, the other spouse may be disabled or unable to
work and sadly that person is in a seemingly out of control
situation. This is where a qualified investor specializing
in foreclosure will step in and help him/her get control
again.

The reason a person or family goes into foreclosure is
important for all to understand. As a homeowner one can be
prepared for such a situation as the aforementioned, and as
an investor, one can be informed as to what causes
foreclosure and how to be of service. Death, job loss,
medical expenses, and divorce are a few of the most common
reasons people foreclose on a home. These factors are real
and an everyday part of society.

 

About The Author

Lucy Landley is a writer for the National Association of Foreclosure Prevention Professionals, and regular contributor of foreclosure related articles. For more information on NAFPP, please visit http://nafpp.org/.

 

This article was posted on April 11, 2006

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Need a handle on how long it will take to liquidate your borrower’s collateral in Indiana? Since the foreclosure process officially starts with the filing of a complaint, my timelines start there. A complaint cannot be filed until there has been a default under the terms of the real estate mortgage or personal property security agreement. Needless to say, many weeks if not months might pass between the initial loan default and the decision to file suit.

The timing of the foreclosure process largely depends upon whether and to what extent the borrower contests the proceeding:

Uncontested Foreclosure: 4 - 6 months minimum. If a business debtor does not contest foreclosure (but will not agree to a deed in lieu), the process can move relatively quickly. Here are the major steps and applicable ranges of time:

1. Filing of the Complaint

2. Service of process on the debtor: occurs in 5-10 days unless service by publication

3. Application for default judgment: can be sought 21-24 days after service of process

4. Entry of default judgment and decree of foreclosure: should occur within approximately 30 days after the Application is filed

5. Praecipe for Sheriff’s sale, including notice of same: by statute, cannot be filed until 3 months after the Complaint

6. Sheriff’s sale: happens about 45-90 days from Praecipe, depending on the county

Contested Foreclosure: 6-9 months minimum. Given the vagaries of litigation, it’s virtually impossible to conclusively estimate how long a contested foreclosure case may last. Much depends upon how clear the default and the damages are. Perhaps the most significant factor relates to the time associated with workout negotiations. In that regard, each case is different. Here are the main steps of a fairly quick contested foreclosure:

1. Filing of the Complaint

2. Service of process on the debtor: occurs in 5-10 days unless service by publication

3. Appearance of debtor’s attorney and motion for one or more 30-day extensions of time to respond to the Complaint: filed 20-23 days after service of process

4. Answer to Complaint: filed 30 days after filing of Appearance and expiration of last motion for extension

5. Motion for summary judgment: can be filed immediately after the filing of the Answer

6. Objection to motion for summary judgment: due 30 days after the filing of the motion for summary judgment

7. Summary judgment hearing: usually held 75-120 days after the motion is filed

8. Entry of judgment and decree of foreclosure: occurs on day of hearing, or soon thereafter, unless the motion is vigorously contested with viable defenses

9. Praecipe for Sheriff’s sale: can be submitted immediately after the entry of judgment assuming more than 3 months have passed since the complaint was filed

10. Sheriff’s sale: takes place 45-90 days from Praecipe, depending on the county

Judicial sales. Indiana law requires a judicial sale in order to foreclose a mortgage. I.C. 32-29-7-4 (http://www.ai.org/legislative/ic/code/title32/ar29/ch7.html#IC32-29-7-4) is a nice option for creditors looking to expedite a sale. The statute permits, under certain limited circumstances, the sheriff’s sale to be conducted by a private auctioneer on the civil sheriff’s behalf. This may be advisable in counties without regularly-scheduled sheriff’s sales. (I should note that, as to personal property security interests, UCC/Article 9.1 and/or the terms of a security agreement may allow the creditor to repossess the collateral without a sheriff’s sale.)

Be prepared for delays. Although the basic procedure is the same throughout Indiana, the timing can be impacted dramatically by the dockets of the individual courts and/or the schedules of the individual civil Sheriffs’ offices. The periods described are the minimum time periods. The actual time usually is longer. This is especially true if there are multiple creditors named in the lawsuit. Further, in contested cases involving debtors represented by counsel, opposing attorneys can prolong the process in a variety of ways, including multiple motions for extensions of time, requests for discovery and vigorous challenges to a motion for summary judgment. In the event a trial must occur, a resolution of the case can be delayed several months if not years. In addition, a bankruptcy can be filed up until the time when the Sheriff’s sale begins, and that can delay the foreclosure process indefinitely.

Depending on the goals of the lender, the lawyer representing the lender can push the case aggressively toward a sale. Or, counsel can be more passive to give the parties time to assess whether a refinancing arrangement may be warranted. The parties can settle, or the debtor can redeem - real estate / I.C. 2-29-7-7 (http://www.ai.org/legislative/ic/code/title32/ar29/ch7.html#IC32-29-7-7); personal property / I.C. 26-1-9.1-623 (http://www.ai.org/legislative/ic/code/title26/ar1/ch9.1.html#IC26-1-9.1-623) - right up to the sale or disposition of the collateral. Debtors’ attorneys know this, so don’t be surprised if a borrower waits until the eve of sale either to file for bankruptcy protection, redeem or yield to the lender’s loan modification terms.

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Owner Financing - Safety Tips
 by: Steve Gillman

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Why offer owner financing when you sell? A higher price, to start with. Add to that a good return on your money, a faster sale, and an easier sale of a “problem property.” Good reasons, but how do you do it safely?

1. Ask for a large downpayment. This is the most obvious way to be safe, but not always possible. The point of owner financing is to help the buyer get the property, and downpayment is one of the areas most buyers need help.

2. Ask for other security. If a buyer wants it with little down, and you like the return you’ll get, make it safe by putting a mortgage on other property that the buyer owns. Agree to release the mortgage when they’ve paid down the balance to a certain level.

3. Credit checks. Ask them to pay for and bring you a credit report. Bad credit might be okay, but type of bad credit is important. An unpaid hospital bill they’re disputing is obviously not as relevant as their unpaid loans.

4. Use your instincts. Are you usually right about people? If so, give some weight to your judgement of your buyer’s character. Personally, I’d trust a man who felt morally obliged to pay his debts over a playboy that happens to have decent income at the moment.

5. Look at the whole picture. Let’s suppose that a bank will loan your buyer 90%, and is okay with you taking back a second mortgage for up to 5%, allowing the buyer to get in with only 5% down. If you’re getting 6% more than you expected by accomodating the buyer’s needs, where’s the potential loss? You’re okay if he never pays, right?

6. Talk to a lawyer. In some areas it may take two years to foreclose on a mortgage through the courts, and only six months to foreclose on a “contract for sale.” Knowing these things can help you structure the deal in the safest way.

Owner financing makes it easier to sell, and to get a higher price. You just have to be safe about it. Let a real estate lawyer review your paperwork, and use the tips here.

About The Author

Steve Gillman has invested in real estate for years. To learn more, go get your free real estate investing course at: http://www.MakeThatOffer.com.

This article was posted on October 29, 2005

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