Owning Real Property
Owning property has been the foundation of America since proclaiming independence in 1776. Becoming a property owner has become considerably more difficult in the past four years as banks collapsed and mortgage providers repossessed homes in record number.
The level of foreclosure property is staggering, with estimates of over 6 million repossessed homes since 2007. While foreclosure rates dropped in 2011 they are expected to increase in 2012.
To make matters worse, an increase in bank foreclosures could cause home values to decline further. This could lead to an increase in the number of people that enter into strategic foreclosure.
This strategy has gotten media attention because it's controversial. Strategic default has been primarily used by people with exemplary credit scores that can bounce back after a major event like foreclosure. These homeowners can afford loan installments, but owe more than their property is worth.
Since banks typically don't reduce principal balances on mortgage notes unless borrowers are facing financial hardships, some homeowners elect to walk away. Obviously, this is a highly personal decision that needs to be discussed with a real estate lawyer and tax accountant.
While there is undoubtedly plenty of gloom and doom about the real estate market, those with optimistic viewpoints are finding ways to capitalize on the situation. Recognizing there are millions of displaced homeowners, a lot of investors are buying houses to provide rental homes to those who lost their house to foreclosure.
Some people would view this as risky behavior. After all, who in their right mind would rent to people who didn't pay their mortgage installments? Certainly, investors need to conduct due diligence to ensure tenants can afford rental rates, but previous homeowners often make the best tenants.
Better yet, many foreclosed property owners would love to have another chance to buy a house, but won't qualify for bank financing for a few years. This forces them to become tenants until they improve FICO scores.
One way that investors can improve cashflow is to offer properties for sale using creative financing options. These could include: seller carry back trust deeds, take over payments, subject to, or lease purchase option agreements.
Each of these options requires setting up real estate contracts to record the transaction and terms. It is recommended to hire a lawyer to execute documents and file them with proper agencies.
Seller carry back trust deeds are used when sellers provide partial or full financing for property they own. Owner will carry financing isn't much different than bank financing, but owners typically don't extend financing for more than a few years.
Take over payments lets buyers assume the loan payments from the property owner using their good credit. Careful consideration needs to be given because most loan documents require the note to be paid in full if ownership is transferred.
Subject to is used to assign ownership rights to buyers in exchange for pay loan installments. Mortgage notes remain in the property owner's name until buyers can qualify for a home loan.
Lease purchase option agreements are used when buyers want to live in the home as a tenant while working toward buying the property. Buyers secure the property with a down payment and a portion of monthly rent payments are contributed toward the purchase.
Whether you want to own property or use property to produce income it's important to learn about available financing strategies and types of properties for sale. We provide an extensive home buying article library that covers topics of foreclosure real estate, bank owned foreclosures, creative financing strategies, and ways to buy property at discounted rates.
Published on February 03, 2012 at 03:04 AM | Comments: 2
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