Buy Bank Foreclosure Listing
January 7, 2008
At some point, real estate investors who are sitting on the sidelines will decide that enough is enough and begin looking at these bargain prices and look for foreclosure listings.
Are you there yet?
Before jumping on the foreclosure investing train considers a few items. Let’s take a look at the benefits first.
You can buy homes from the owner prior the ending of the foreclosure. This stage is called pre-foreclosure. Chris Tunnessen at Foreclosure.com writes, “During this time, the property still belongs to the homeowner, but the lender has initiated foreclosure procedures because payments have not been made and the loan is considered to be in default.
This is a critical time for not only the homeowner, but the lender as well. More important, it represents a tremendous opportunity for you to make money.â€
The next stage is when the bank has completed the foreclosure process and owns the property. With a righteous foreclosure list you can get huge bang for the buck at this stage. The reason is simple. Most banks do not want to foreclose on a home. It is an expensive and lengthy process. Once they do complete the process, they want to get rid of their bank foreclosure listings quickly by dropping the price for a quick sale.
A friend of mine bought two of these properties in lovely and expensive Orange County, California, both for about 25 % below the market value. When he sold these properties a few years later, he made more money than people will see working ten years.
But there were problems which brings us to the disadvantages.
The biggest one is that you may have to buy the property “as is.†In many cases as it was in my friend’s case, there are undisclosed and sometimes hidden problems.
People tend to get real upset when they lose their pride and joy, their piece of American Dream, their home to a bank. In these emotional states homeowners of foreclosed properties can take what they consider to be their belongings. And they may go to the extremes.
You need a good inspector on your side who can do more than a shallow survey of the property. This is extremely important especially when you consider the next point.
In some states, it is the law that sellers prepare and provide a Residential Property Disclosure to all buyers. This disclosure brings everything to light so that you know what you are getting in to and if they do not disclose something, you have recourses for the potential damages.
In some states corporately owned homes such as bank foreclosure listings may not be required to have an accompanying property disclosure. So it is up to you to take an expert with you who knows how to find out about hidden and undisclosed problems.
Also the bank more than likely wants to sell the property “as is.†So don’t count on them making any repairs and find out what the total cost of the repairs are before you commit yourself.
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What Is A Bank Foreclosure?
January 7, 2008
When you buy a home by borrowing money from a financial institution to buy real estate, you sign a legal contract called mortgage. Mortgage contract obligates you to pay the lender on a certain day of the month until the loan is paid off.
In addition to this obligation there are other terms expressed in the mortgage contract but the most serious breach of contract happens when the borrower does not pay the mortgage payment.
Then the financial institution is forced to begin the steps that can ultimately end with them obtaining the ownership of the real estate property. This procedure is commonly referred to as a bank foreclosure.
In many stories about this unpleasant legal procedure portray the financial institution as a huge, heartless giant who is throwing out little old ladies out in the street on Christmas eve.
The truth is that a bank foreclosure is necessary for the financial institution to maintain its integrity and to protect the interests of its investors, depositors and employees. It is also important to remember that bank foreclosure is a long and tedious process that provides ample opportunities for borrowers to negotiate with the lenders to find alternative solutions to bank foreclosures.
For the most parts banks are in lending money business and not in real estate business and the last thing they want is to end up owning another piece of real estate. Knowing this, if you are facing bank foreclosure, begin educating yourself about alternatives that I will discuss in the next article. Knowledge is one of your greatest allies in a bank foreclosure proceeding.
Real Estate Cold Spots
January 6, 2008
In the latest special issue of Fortune Magazine, there was an article about getting real about real estate. It attracted my attention since it also included a piece about San Diego real estate. Since I live in San Diego, I just had to read it to find out if San Diego is one of the hot spots for real estate appreciation.
Alas, it was not. It was more in line with the subtitle of the article that was how bad it will get. The projected forecast for San Diego in 2007 was reported to be a drop of 3.3% which places my favorite town not necessarily at a freezing cold real estate temperature but definitely chilly. For the curious readers, the worst real estate drop was projected to be Stockton, California.
As am looking out of my home office over our small orchard trees in an exclusive neighbor hood in San Diego, I think back over the last 20 year of owning home in California and the first small three bed room two bath house my wife and I owned in San Jose.
I remember buying that house with a price tag in mid 100,000. When we sold it, San Jose real estate had gone into the tank and in a few months we had to drop the price around $50,000. It was a significant drop if I wanted to ignore the fact that our selling price was still about three times as much as we paid for it. That is a 300%increase.
Taking into account that our down payment for that house, which was the real out of pocket expense, we made close to 800% on our original down payment.
Now you tell me, how would I react toward a projected 3.3% drop?
You may not live in California or lovely San Diego, but wherever you live, if you talk to folks who have had their property over ten years, chances are that they have made more money in real estate than any other investments they own.
I don’t know about you, but I have contacted my real estate agent to look into buying rental properties. With all the horrible real estate and Foreclosure numbers that are coming out and the wonderful job the media is doing promoting these numbers, I am hoping that there are a few motivated sellers out there who would be glad to let me handle the risk of ownership.
Time will tell.
VA Foreclosure Procedures Differ From Banks
January 6, 2008
When a mortgage loan is granted under the Veterans Administration, the lender typically charges slightly more for the paperwork, even though the interest rates may be slightly lower than market price. The extra money for paperwork will also help to offset expenses in the event the homeowner defaults on the loan and VA foreclosure becomes necessary.
When a person applies for a VA loan, the lending institution goes to the VA with the application who will review it and even if the lender does not believe it is a good risk, the VA may approve the loan and offer a guarantee to the lender on the loan. This guarantee is not always for the full price of the mortgage and may be as low as for 80 percent of the appraised price. To avoid VA foreclosure the buyer must meet all the requirements set down by the VA as well as the lending institution.
When a buyer misses a payment, the lender must notify the VA that the loan is in default status and maintain communication with the VA to keep them informed of the steps being taken to remove the default status of the mortgage. Failure to communicate late payments as well as steps taken to secure payment as part of the VA foreclosure procedure, could cause the VA to void its loan guarantee with the lender.
Lenders Must File Timely Claims For Insurance.
A mortgage undergoing VA Foreclosure must not only follow VA foreclosure rules it must also adhere to all state laws governing foreclosures. While a property is in foreclosure procedures the lender must take steps to maintain the property in good condition so that once VA foreclosure has been finalized, the Veterans Administration can put the property up for sale without the need for maintenance or repairs.
Being able to recoup the money spent for a house, which has been defaulted requires the lender to file a claim with the Veterans Administration and must be able to document all losses and expenses involved in pursuing the VA foreclosure. Ownership of the property will usually revert to the VA, which often puts it on the market at a fair market value.
Most VA Foreclosure procedures are due to non-payment of mortgages however there are circumstances in which a VA foreclosure will not be granted if, under special considerations, the veteran borrower can prove hardships related to their status as a veteran.
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