Real Estate Foreclosure
Real estate foreclosure is a scary situation for homeowners. They are in the process of losing their home to the bank because they are financially unable to make their mortgage payments. Their credit will be damaged during the real estate foreclosure, potentially making it impossible for them to purchase another home.
In the current economic state, real estate foreclosure is a growing problem. Homeowners are unable to pay their mortgage payments with the skyrocketing costs of utilities, groceries, gasoline and other necessities of life.
When facing real estate foreclosure, homeowners must work with their lender's loss mitigation department. The job of bank loss mitigators is to provide alternative options for the homeowner while minimizing losses for the lender.
Options are available to help homeowners stop real estate foreclosures. When facing temporary financial hardships, the bank loss mitigator might suggest a forbearance agreement followed by a repayment plan. For the homeowner who faces long-term financial distress, a loan modification which lowers payments may be an option to save the home from foreclosure.
During real estate foreclosure, investors have an opportunity to purchase the home below market value. This can be a lucrative investment for real estate investors and possibly help the homeowner at the same time. There are three stages to purchase real estate once mortgage payments become delinquent.
Real estate purchased during pre-foreclosure uses the short sale process. Short sales are on the rise in the United States due to the number of real estate foreclosures. During a short sale, the mortgage holder agrees to sell the property for less than is due of the mortgage note. Short sales can be time consuming and involve a considerable amount of paperwork which must be submitted by the borrower.
Once real estate has been foreclosed, investors can purchase property through foreclosure auctions. During the foreclosure auction, the minimum bid on the property is generally the amount due on the mortgage note along with fees associated with the foreclosure process. When no bids are placed at the real estate foreclosure auction the property reverts back to the bank.
When properties revert back to the bank, investors are purchasing bank owned or real estate owned (REO) properties. Real estate owned property investments are essentially like buying any other property. Instead of buying the property from a person, the investor is purchasing the property from the bank. Investing in REO properties is generally less risky than investing in foreclosure properties sold through auctions