Foreclosure - The Last Resort

Brenda Cote asked:


Foreclosure is a process in which a piece of real estate becomes the property of a lending institution due to the legal owner’s inability to make scheduled payments on the mortgage or deed of trust.

Typically, the lender files a notice of default after a homeowner fails to make his or her mortgage payments for several months. If the loan is not reinstated, the lender moves to foreclose. As a result, the lender becomes the new legal owner of the property and has the right to resell the property and recover any outstanding loan balances in addition to foreclosure expenses.

The foreclosure process consists of three stages: pre-foreclosure, which begins the redemption period; foreclosure, which is when the home is sold at a public auction; and post-foreclosure, which is when the property reverts back to the lender if it fails to sell at the public auction. Although each stage offers bargain-buying opportunities, the pre-foreclosure stage is considered by many real estate investors to be the most promising time to purchase during the foreclosure process.

Investing in pre-foreclosures means you will be acquiring property any time before the scheduled public auction. As the investor, you will be buying the property directly from the owner. The earlier you contact a homeowner in pre-foreclosure, the more time you will have to make a connection, structure a deal and purchase the property.

There is a common misconception that real estate investors purchasing homes from owners facing foreclosure are taking advantage of the homeowner’s misfortune. This is simply not true. A Notice of Default is filed only when a borrower (property owner) has broken the terms agreed upon with lender at the inception of the loan in default. This breech gives the lender every right to protect its financial interests. Therefore, an experienced real estate investor becomes the problem solver by finding a win-win solution that will help the homeowner get out of default.

Property owners facing foreclosure are typically scared or in denial. Many of them hope some miracle will happen that will make their ordeal simply go away. Doing nothing will certainly ensure a homeowner’s foreclosure, loss of home, loss of equity and credit rating damage for an entire decade.

When dealing with an owner in pre-foreclosure, talk to them as soon as possible. It is vital to explain the following three benefits of avoiding foreclosure:

1. Protects their credit

By working with an investor, homeowners may be able to avoid foreclosure and begin rebuilding credit. Even if a homeowner endures the process of losing his or her home, the repercussions of a foreclosure on a credit report are far reaching. A poor credit rating affects everything from buying a car to renting a home. With certain businesses, credit is even a factor in employment. Investors often help homeowners protect credit.

2. Make a profit

While it is true that real estate investors purchase at a discount, a homeowner facing default may still be able to recover some of their equity and walk away with profit.

3. Get a fresh start

Stopping the foreclosure allows homeowners to breathe a sigh of relief. As the pain and pressure of the foreclosure lifts, they find it easier to move on and begin rebuilding their life.

Buying in the pre-foreclosure stage can be the most lucrative slice of a real estate investor’s business. Once rapport and trust have been established, a professional real estate investor can determine whether the sale of a property would truly benefit everybody involved.

There are various ways to profit while helping people find viable solutions for their defaults. The following three are most common:

1. Purchase at a discount

Real estate investors are not likely to make a profit by purchasing at full market value. As an investor, it is essential to inform potential sellers that you earn your living from your profits. Therefore, you must buy for less than retail price while taking into account acquisition, sales and holding costs and any necessary repairs. A discount of twenty to thirty percent of full market value is common practice among real estate investors.

2. Buy property “subject to” the existing loan

There are widely spread rumors that it is illegal to purchase property that involves taking over an existing mortgage. This is completely false. While assumable loans are practically extinct, it is perfectly legal to purchase property subject to an existing loan. It is important to be aware of the “due on sale” clause stating the existing lender can call the loan due upon the transfer of title. In other words, the lender has the right to demand full payment of the outstanding loan balance at the time of transfer. In practice, lenders would rather receive their monthly payments than call the loan. Purchasing property subject to the existing financing means a smaller out-of-pocket investment for the real estate investor.

3. Create instant equity utilizing a Short Sale

Structuring a Short Sale can prove profitable when dealing with a homeowner facing foreclosure whose property is equity deficient. In this market, troubled lenders would rather discount their mortgages than increase their already mounting inventory of foreclosed properties. The type of discount you create will largely depend on the quality of your Short Sale package combined with the quality of your negotiating skills.

Real estate investors prevent a large number of foreclosures every year across the country. There are many ways for investors to make a profit while helping people move on with their lives.

Undoubtedly, the money is there to be made. Pre-foreclosures are a fabulous way to make it.



Chris

Going Crazy! asked:


How long after a foreclosure can we purchase another home in California? Any info would be helpful! Thanks

Owen

blavelin asked:


A property that I am a co-signer on is going into foreclosure. In a question I asked previously regarding this matter, someone pointed out that I will be sent a 1099-c form. What exactly does this mean? If the house is sold at auction will I owe taxes on the amount the house sells for or the amount that was owed or, if the house does not sell for enough, will I owe taxes on the amount not paid?

If we can sell the house before the foreclosure is complete, how does that impact the situation? I’m so confused.

And please, no posts about your tax or loan company. I will report it as abuse.

Emily

Sharkbaitsoftware .com asked:


Foreclosure is the legal proceeding in which a bank or another creditor sells or repossesses real estate due to the owner’s failure to comply with an agreement between the lender and borrower ( the ‘deed of trust’). Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is referred to as “the lender has foreclosed its”.

There are two sorts of foreclosure in most common law states. Using a “deed in lieu of foreclosure” the bank claims the title and possession of the property in full satisfaction of a debt, usually on contract. In the proceeding known as foreclosure , the property is auctioned by a county sheriff or some an officer of the court. The sheriff then issues a deed to the winning bidder. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward the lender receives title to the immovable property in return. Some states have adopted non-judicial foreclosure procedures, in which the mortgage, or more commonly the mortgage’s attorney or designated agent, gives the debtor a notice of default and the mortgage’s intent to sell the property in a form prescribed by state statute. This type of foreclosure is commonly referred to as “statutory” or “non-judicial” foreclosure, as opposed to “judicial”. With this “power-of-sale” type of foreclosure, if the debtor fails to cure the default to stop the sale, the mortgage or its representative will conduct a public auction in a similar manner as the sheriff’s auction. The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). In some cases further legal action, such as an eviction may be necessary to obtain possession of the premises.

Strict Foreclosure is an equitable right available in some states. The strict foreclosure period arises after the foreclosure sale has taken place and is available to the foreclosure sale purchaser. The foreclosure sale purchaser must petition a court for a decree that will cut off any junior lien holder’s rights to redeem the senior debt. If the junior lien holder fails to do so within the judicially established time frame, his lien is cancelled and the purchaser’s title is cleared. This effect is the same as the strict foreclosure that occurred at common law in England’s courts of equity as a response to the development of the equity of redemption.

In most jurisdictions it is customary for the foreclosing lender to obtain a title search of the immovable property and to notify all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation. In all US jurisdictions a lender who conducts a foreclosure sale of immovable property which is the subject of a federal tax lien must give 25 days’ notice of the sale to the Internal Revenue Service : failure to give notice to the IRS will result in the lien remaining attached to the immovable property after the sale. Therefore, it is imperative that the lender obtain a search of the local Federal Tax Liens so that if the persons or companies involved in the foreclosure have a federal tax lien filed against them, the proper notice to the IRS will be given.

Some individuals and companies are engaged in the business of purchasing properties at foreclosure sales. A number of companies promoting themselves on the internet and in other advertising media have sprung up touting the profits that can be made buying properties in foreclosure. Purchasing properties in foreclosure can be a “risky business” and should not be attempted by the uninformed. Read books on foreclosure investing and purchase a good foreclosure investment software to protect yourself from buying the wrong foreclosure properties.

For more information visit www.sharkbaitsoftware.com



Marina

Jorge L asked:


I have not been able to pay my house for the past six months, it went into foreclosure and know I got to pay Property Taxes but I dont have the money either. Could all of this affexct my ability to get my citizenship.

Greta

robotdentist asked:


Hi. I have a verbal month to month agreement with my landlord in New York State. She recently stopped paying the mortgage and the house is going to go into foreclosure. I got the paperwork from the attorney handling it back in November. My lanlord states that I have to continue to pay her the rent each month of $400. Is this true? I’ve heard from other sources that I can continue to live in the house with out paying my landlord until the bank gives me a 60 day notice to move.

Thanks for all your help in advance!

Sebastian

Julio Martinez-Clark asked:


Foreclosure is a financial and legal issue. If you attack the issue from a financial standpoint, you must to have cash to pay your mortgage. If you attack it from a legal standpoint, you must be able to find a flaw in the foreclosure lawsuit to dismiss it. I don’t see any other way of stopping foreclosure.

If you are facing foreclosure at this moment, you are inundated by letters from foreclosure assistance companies that charge outrageous amounts of money to negotiate with your lender; the majority of these companies are a scam.

You also get creative letters from so-called “investors” offering free advice and with the intention to make you sell your home to them at a deep discount using deceptive kitchen table closings in which they make you sign mysterious paperwork (land trusts, etc) that basically transfer the title/deed of your home to them sometime taking over your mortgage payments and leaving the loan liability on your name. Some of this “investors” also offer very deceptive “lease-back” arrangements in which they let you stay in your home as a tenant, and they pray that you stop paying rent so that they can evict you so that they can take possession of your house. You also get letters from Realtors® who are trying to make you list your home for sale and paint a rosy picture of the real estate market and the value of your home (Read National Consumer Law Center’s report “Dreams Foreclosed;” one of the best studies recently written about the rampant theft of American’s homes through equity-stripping foreclosure rescue scams).

Last but not least dangerous, you get letters from nice attorneys offering free consultations to make you file Chapter 13 bankruptcy; what these attorneys don’t tell you is that based on research (see studies: The Realities of U.S. Personal Bankruptcy under Chapter 13, and Chapter 13 Bankruptcy: Successful Versus Unsuccessful Debtors) the overwhelming majority of Chapter 13 filers do not complete their payment plans and are not discharged.

You will also find on the internet a proliferation of eBooks that promise to stop foreclosure magically with names such as “Foreclosure Free Zone,” “The Fight Of Your Life: How To Beat The Foreclosure Demons Smart Solutions For Saving Your Home,” “Avoid Foreclosure And Fix Credit Problems,” ”Foreclosure Help - Don’t Let The Bank Take Your Home!“ In my research, I’ve even bought some of these type of eBooks just to see what’s so magical about them, and found that they don’t have any information that isn’t common sense and readily available for free online. All the advice in these books fall into these categories: 1) Talk to your lender, 2) Sell your home, 3) File for Chapter 13 bankruptcy protection, and 4) Refinance/Get a loan. None of these books, nor the Chapter 13 attorney, nor the Realtors®, nor the “investors” in their white horses tell you about your legal rights and how you can defend yourself from the abuse of the debt collector attorneys.

Foreclosure is a financial and legal issue. If you attack the issue from a financial standpoint, you must to have cash to pay your mortgage regardless of negotiating a payment plan with your lender yourself or through a foreclosure assistance/consulting company. Bear in mind that when negotiating a payment plan with your lender (sometimes called Forbearance Agreement) , you may be required to come up with a lump sum (usually half of your past-due payments) and proof of income. It’s very simple; if you have sufficient cash and/or income to pay your monthly mortgage obligation, it’s very likely you can negotiate something with your lender to stop foreclosure. If you don’t have the cash and/or the income, you will have to attack the issue from a legal standpoint.

If you attack the issue from a legal standpoint, you must learn about your legal rights and, preferably with the help of a consumer protection attorney (www.naca.net), find a technical or legal flaw in the lawsuit to have it dismissed. These flaws could be hidden in the lender’s debt collection attorney not following your state’s rules of civil procedures (for instance: You were served improperly) or by digging into the foreclosure complaint and court docket to see if there is an actual plaintiff’s proof of ownership of the promissory note, or if the original promissory note has been filed in the court records, or any of the other twenty-something reasons that that could render a judgment void or invalid.

There is no magic in foreclosure. If a homeowner doesn’t pay his or her mortgage, the lender will foreclose on their homes. There is no magical negotiation with a lender that can be done without cash at hand and/or ability to pay supported by proof of income. There is a lot of literature on the internet and in bookstores about the debt collection industry, on how to stop foreclosure negotiating with the mortgage lenders, about how debt collections works, about what to expect from debt collectors, etc, etc. However there is little information about how to navigate the legal system, on how to file pleadings and motions and on how to execute the steps necessary to win the debt collection/foreclosure battle in court. Almost nobody explains to homeowners in simple terms how the legal system works and how they can use it to your advantage to win debt collection lawsuits.



Heidi

Eric B asked:


I see all these things on TV but I want to LEARN all about the tax foreclosure industry before I do anything dumb. If you have had success with anything related to this, please let me know how you started learning about it.

Caden

David Faulkner asked:


The good news for first-time buyers, or those interested in investing, in the Houston residential market is that there are many Houston foreclosures for sale. These Houston foreclosures include both Veterans Administration and HUD properties which have been taken back by the government, as well as residences now owned by the banks and financial institutions which once held the mortgages on them.

The types of Houston foreclosures in which you are interested will make a difference in how you buy them. Your purchasing process will be dictated by the institution which holds title to the property, so if you feel somewhat intimidated finding your way through the various rules and regulations, consult with a realtor experienced in handling the purchase of Houston foreclosures.

Locating Houston Foreclosures

Walk away from any so-called”professionals” who offer provide you, for a fee, with listings of Houston foreclosures; the information is freely available from plenty of sources. If, however, you would like to have a listing of homes in pre-foreclosure, on which the owners may be in default but which have not gone into actual foreclosure yet, you’ll have to pay for it.

A listing of Houston homes in pre-foreclosure may prove well worth its price, because it will direct you to highly motivated sellers who want to avoid having foreclosures on their credit histories.

Realtors who specialize in Houston foreclosures and Internet sites devoted to foreclosures can also supply you with listings.

Houston Foreclosures: A Wide Choice

If you’re looking at HUD or VA Houston foreclosures, you’ll have a better chance of qualifying as a purchaser if you intend to make the property your primary home. These foreclosures are not available as investment properties until the have first been through the auction process. If you do manage to get a HUD or VA foreclosure, you’ve probably landed a bargain, with favorable financing as the icing on the cake.

Bank-held Houston foreclosures, on the other hand, are available both to those looking for residences and those interested in investment properties. Homes in bank foreclosure are acquired more easily than government foreclosures, and can be purchased directly from the lenders, who can also arrange buyer-friendly financing.

If you’d like to make an entry into the Houston real estate market, begin by getting information on Houston foreclosure listings. With a little legwork, and some careful homework, you’ll be on your way to finding the residence or income property you desire, at a price that will give you a Texas-sized smile for a very long time!

If you are losing your home to foreclosure, just remind yourself that you are one among hundreds of thousands who are. Financial difficulties can assault and devastate best-prepared among us, and all that is left is to look forward and keep going.

There was a time when you thought, and your banker agreed, that you were a great bet to handle monthly payments on a mortgage for twenty or thirty years. You had that confidence once, and you can recover it. And when you do, you may find yourself surveying the foreclosures market to save money while putting yourself in your own home once again!



Chelsey