Guidebook to Fighting Foreclosure

Build A Fortune With Real Estate Foreclosures

Investing in Real Estate is the best investment anyone can make. However, most successful real estate investors know what to do and what to avoid doing. It is not a guarantee that all new investors will be successful and that successful investors have a way of avoiding hardships. Investing in real estate requires one to do enough research and get help from professionals who not only want to sell to you but also want to see you succeed as investors. The real estate investment window has been open for wealth creation for many years, yet many people ignore it. The time to make everything right for your family is now, and if you want to wait, it may be too late. How Not to Lose Money and Risk Everything you own Investing in Real Estate is a manual that gives different ideas of how creativity is essential when considering investing in realty. Ideas on how to purchase foreclosures, keep time, and easy to follow guides are provided in the manual to help the users have an easy time getting their things to become one of the successful investors. Read more here...

Build A Fortune With Real Estate Foreclosures Summary


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Author: Jarad Severe
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Build A Fortune With Real Estate Foreclosures And Short Sales

Highly Recommended

Recently several visitors of blog have asked me about this manual, which is being advertised quite widely across the Internet. So I purchased a copy myself to find out what all the excitement was about.

All the modules inside this ebook are very detailed and explanatory, there is nothing as comprehensive as this guide.

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How To Find And Profit From Foreclosures In Any Market A Few Words About This Book

PLEASE NOTE We've really tried our best to 'over-deliver' with this book for you. We think you'll find it to be one of the best values in foreclosure investment property education that you'll find for the price. (See similar texts selling for 100-500 from the more hard selling 'guru's' and get rich quicksters.) Please send your positive or negative feedback and comments to Federal Homes and be sure to visit for foreclosure listings in your area

How to Buy Foreclosures

How to Find and Profit from Foreclosures in any Market Timely and accurate foreclosure data in all 50 states. Federal Homes specializes in the search for and sale of HUD and VA properties. Although we are a NY based brokerage, our website (s) provide numerous resources for home buyers and investors across the country as well as access to merged nationwide foreclosure searches. (Hud, VA, Fannie Mae, Freddie Mac, Bank REO, More) We can also offer buyers non foreclosure homes that are available through the MLS with which we are associated. Please contact us for more information concerning any HUD, VA or bank REO home that you find listed at our site. We don't list homes, so we don't have dual loyalties or a stable of our own listings we're trying to sell you first. We work for buyers only to find you the best deal at the best price on either 'regular' homes for sale or for foreclosure property. Federal Homes is a Member of The Saratoga, Schenectady, Schoharie Association of Realtors....

Buy Preforeclosures From Distressed Owners

Each year in every community, hundreds (sometimes thousands) of property owners hit the financial skids. Divorce, job loss, accident, illness, business failure, and other setbacks render people unable to make their mortgage payments. Rather than effectively deal with their problems as soon as default is imminent, most owners hang on too long, hoping for a miracle to bail them out. Since miracles are rare, most of these people end up staring foreclosure in the face.

Stopping a Foreclosure

The first way through which to buy foreclosure properties is known as preforeclosure that refers to the time when the lender has begun the process but you buy the property before the actual foreclosure takes place. It's truly a win-win situation, because you'll make a major profit at the same time you save the sellers from showing a foreclosure on their credit history and you provide them with the cash they need to move and get on with their life. Here's what a typical preforeclosure deal might look like. A hypothetical couple, Sam and Susan Sunshine, have a house worth 182,000. The principal balance on their first mortgage is 105,000, and they have a second mortgage of 15,000. Sam owned his own business but about a year ago suffered an injury that left him unable to work. He didn't have disability insurance and his business failed. Susan's job doesn't pay enough to support them in their current lifestyle. They've gradually gotten further and further behind on their house payments,...

Approaching Preforeclosure Sellers

It's important to approach prospective sellers with tact and diplomacy. I recommend a personal visit as soon as possible after you see the legal notice if the owner isn't home, you can leave a letter. Most would-be investors just mail the letters, but the difference that will make you successful is in going to the door. People facing foreclosure are probably being bombarded with mail by collectors and may not be opening all the letters they get. If you want to use mail, postcards work better because the homeowner doesn't have to open an envelope to see that you are offering a solution to his problem. You might want to call the homeowner if his number is listed. This can work, but I still prefer a personal visit because it allows you to see the property so you know what you're dealing with. The best time to go to houses that are facing foreclosure is Sunday afternoon. That's when you're most likely to find people at home. Take your business cards, contracts, information release forms,...

Profit From The Foreclosure Auction

Foreclosure Auction As you can see, foreclosure auctions seem purposely designed to yield the lowest possible sales price. They take place under conditions that violate all principles of effective marketing. No Guarantee of Vacancy. The foreclosure authorities don't even agree to convey the property free of occupants (owners, tenants, squatters). You may buy a property at a foreclosure auction and spend several months (or longer) to evict the people staying there. Clever occupants can use many delay tactics. Here are several Claim that the foreclosure sale violated due process. Seek protection under a lease agreement (even though foreclosure sales nullify leases if made after the mortgage on the property was recorded in the public records). For most would-be buyers, the risk, expense, and aggravation of foreclosure sales deter them from even showing up to bid. When you consider the lame marketing efforts, the adverse conditions of sale, and the potential occupancy problem, is it any...

The Foreclosure Sale Summing Up

Few real estate investors choose to bid regularly at foreclosure sales. The great majority prefers to avoid the time, expense, risks, and financing difficulties that foreclosure buying entails. You, too, may agree with this view. But if you are willing to learn the foreclosure game (as it's played in your locale), do your homework, and manage your risks, you can build profits quickly. You can often buy properties at foreclosure auctions for less than their market value. Your challenge is to learn which of these properties meet the test of a true bargain and which ones carry severe risks, expensive problems, or excessive (upside-down) financing. Naturally, too, foreclosure opportunities expand and diminish as real estate markets weaken or strengthen. In strong real estate markets, foreclosure bargains become ever more difficult to locate. In contrast, cyclical downturns provide foreclosure specialists boom times. If property prices do begin to fall in some areas, don't fret the...

Buy From Foreclosure Speculators

Assume a speculator puts in a winning foreclosure bid of 145,000 on a property that would sell for 195,000 if it were fixed up and marketed effectively. Soon after the foreclosure sale, you offer the speculator 170,000 (or whatever). To minimize risk, you attach several contingencies to your offer that permit you to get the property thoroughly inspected, evict any holdover owners or tenants, clear up title problems, seek title insurance, and arrange financing. If the property checks out satisfactorily, the sale closes, and the speculator makes a quick 25,000 (more or less). You get the property at a discount without the costly surprises that can turn a superficially promising foreclosure buy into a loss.

Deep in debt Foreclosures

jjjW Foreclosure is losing your property involuntarily to pay a debt. The most common types of foreclosure are the result of unpaid mortgage loans or unpaid property taxes. Failing to pay back borrowed money or taxes in a timely manner can result in a foreclosure. The lender or community to whom the debt is owed initiates foreclosure proceedings in court. These proceedings enable the lender or local unit of government to sell the property and collect the unpaid debt from the proceeds of the sale. I discuss foreclosures that result from unpaid mortgage loans in Chapter15. I cover the sale of property for unpaid taxes in Chapter 16.

Mobile Home Foreclosures

In Chapter 6, you learned about real estate foreclosures, but because mobile homes are technically not real estate, they are not subject to the same foreclosure procedures. That doesn't mean, however, that lenders have no recourse if buyers don't pay. Instead, the process is similar to the one that regulates defaulting on an automobile loan the lender repossesses the car. An important difference between a mobile home repossession and a real estate foreclosure is what happens after lenders take back the property. With real estate, lenders foreclose, and the property is sold at auction to the highest bidder. The lenders have the auction proceeds go up to the amount they are owed, and then entities with junior liens are paid with whatever funds might be left over. If a property doesn't sell for enough money to pay off all the mortgages and liens, those debts are wiped out. But with a mobile home, if the lender is unable to sell the home for the full amount due on the loan, the original...

Government Foreclosures Often Come with Financing

In earlier chapters, we mentioned the U.S. Department of Housing and Urban Development (HUD) and the Veterans Administration (VA). Both these agencies often have foreclosure properties for sale with financing in place. Here's a letter telling of one BWB's experience Thus, during the past year I acquired six properties five single-family homes and one 4-unit building from lists of HUD and VA foreclosures. I took over each property with at least a 25 discount off the market price. In two cases, the VA sold to me at over 30 discount and provided 100 percent fixed-rate financing for 30 years. By best estimate these properties are valued at about 435,000 with combined equities of 126,000. This letter shows that on occasion the VA and also HUD have built-in financing available for 100 percent-financed foreclosure properties. So how do you get such financing for your foreclosure deals Here are the steps for you to take.

Check Your State County and City Web Sites for Foreclosures

Nearly every state, county, and city has a Web site. Log onto the site for your area and go to the foreclosure section of it. You'll find information on how and where to obtain data on foreclosure sales in your area. Attend a few of these foreclosure sales or auctions to get the feel of what goes on. Then make a bid on a property that you believe has business potential for you. Just be certain to work the numbers BEFORE making your bid. And if you wish I'll be happy to do this for you, if you're a subscriber to one of my newsletters. But I must have at least one day to do so

Foreclosure Dos and Donts

Don't fleece folks by trying to squeeze every last cent of profit possible out of a deal. I promise you this At the end of the day it feels better to take a little less money on a deal, where I helped a person avoid foreclosure and still let him walk away with some start-over capital, than to be the only one walking away fat and happy from a deal.

Shut down Foreclosures

When a borrower defaults on a loan, the lender may have to institute foreclosure proceedings. Foreclosure is the process by which the lender takes over ownership of the property and sells it for nonpayment of the debt. Mortgages may contain an acceleration clause that enables the lender to declare the entire balance due after the borrower is declared in default (the number of missed payments that result in default is set by the bank). Declaring the loan due in full makes the foreclosure process easier, because the entire debt is due right away and must be satisfied by sale of the property unless of course the borrower wins the lottery and pays off the loan. Any funds left after all the debts associated with the property are paid go to the borrower. Foreclosure can occur in one of several ways Judicial foreclosure, which is where the court orders property to be sold as a result of a foreclosure action brought by the lender. This type of foreclosure is the most common. And you can...

Federal Home Loan Mortgage Corporation Fhlmc Freddie

The Federal Home Loan Mortgage Corporation was created by the Emergency Home Finance Act of 1970. FHLMC is owned by the 12 Federal Home Loan Banks to establish their own secondary mortgage market. It is the newest of the three government related agencies. Because Ginnie Mae included only FHA and DVA mortgages in its securities, there was a great need to develop a mortgage-backed security for conventional loans. In 1971, the Federal Home loan Mortgage Corporation, also known as Freddie Mac, introduced the first security backed by conventional loans. Freddie Mac is a subsidiary of the Office of Thrift Supervision (OTS), which supervises the federally chartered thrifts. As a government-chartered stockholder-owned corporation, FHLMC buys mortgages and sells them in the secondary market.

Federal home loan bank board

The Federal Home Loan Bank Board (FHLBB) is an independent federal regulatory agency which serves savings and loan associations in a manner similar to the way that the Federal Reserve System serves banks. It acts as the banker's bank. Origin and Structure - The FHLBB was created in 1932. The United States is divided into 12 districts with a Federal Home loan Bank established in each district.

Automated Marketing for Foreclosure and Pre Foreclosure Investing

As you may know, foreclosure is the legal process in which a lender sells or seizes a person's property to recover and repay the debt attached to that property. Foreclosure occurs when someone borrows money to buy real estate but cannot pay the agreed-upon monthly payments. I hope that you will agree with me that none of us wish hard times on anyone else, but when a foreclosure does occur, it creates an investment opportunity. Someone is eventually going to take advantage of it, so my philosophy is to be first in line. The great thing about foreclosures is that you can make money TIP Foreclosure is the legal process in which a lender sells or seizes a person's property to recover and repay the debt attached to that property. Foreclosure can be prevented by bringing payments current. But most often, homeowners can't catch up, and they lose everything. My strategy is to come in prior to foreclosure, buy the property, allow the homeowner to pay off the loan, and save their credit rating....

Follow Up with Lenders after Foreclosure Sales

You can learn of REOs by attending foreclosure auctions. When a lender casts a top bid for a property in which you're interested, buttonhole the bidder and start talking business. Alternatively, visit the REO (loss miti- 1 Several exceptions might include (1) states where the foreclosed owners may have a right of redemption (2) cases where the foreclosed owners still retain some legal right to challenge the validity of the foreclosure sale or (3) instances where a bankruptcy trustee or the Internal Revenue Service (tax lien) is entitled to bring the property within their powers. Rarely would any of these potential claims be worth losing sleep over. But before closing an REO purchase, talk over these issues with a real estate attorney. Sometimes, too, lenders pick up REOs without going through foreclosure. During the last real estate downturn, many lenders would open their morning mail to find the keys to a house, a deed, and a note from the distressed owners, We're out of here. It's...

The Foreclosure Sale

Eventually, when defaulting property owners run out of legal defenses or delaying tactics, the foreclosure sale date arrives. At this point, the property is auctioned to the highest cash bidder. On occasion, the winning bid is submitted by a real estate investor (foreclosure specialist), speculator, or even a homebuyer. More likely, though, the lender who has forced the foreclosure sale bids, say, one dollar more than the amount of its unpaid claims (mortgage balance, late fees, accrued interest, attorney fees, foreclosure costs) and walks away with a sheriff's deed to the property. From then on until the lender (or its realty agent) sells the property, that property remains on the lender's books as an REO.

Finding Foreclosures

One of the easiest and most effective ways to find foreclosures is through the legal notices in your local newspapers. Learn to read the foreclosure notices they tell you everything you need to know to decide if a property is worth pursuing. A foreclosure notice is just like a news article it gives you the who, what, when, where, and why of the situation. Basically, it tells you who is in foreclosure (the owner of the property), what property is going to be auctioned off (the address and or legal description), when and where the auction will be held, and why the property is being auctioned (because a lien holder is foreclosing).

Foreclosure Auctions

The second way to buy foreclosure properties is at a foreclosure auction, traditionally held on the courthouse steps (although most courthouses have brought that function indoors). Auctions are advertised in the legal notices of the newspaper, and your county clerk's office can provide you with the information you need to know to attend and buy at the auction. It's a good idea to attend an auction to see what goes on before you go to buy Chapter 7 tells you more about auctions in general. Foreclosure auctions usually don't attract big crowds you'll generally see 10 or 20 people watching with maybe only 1 or 2 actually bidding on property. Bobby Threlkeld routinely buys at courthouse auctions and says that's how he gets great deals on properties when the owner didn't have sufficient equity to make a preforeclosure deal work.

After Foreclosure

The third way to buy foreclosure properties is from the lender after foreclosure if the property didn't sell at auction or from the investor who purchased the property at the auction. This can be a lucrative way to buy property, especially in a buyer's market. Lenders are often willing to accept creative offers, such as no money down, no payments for three months (to give you time to clean and fix up the property), under market price, and at low interest rates.

Chapter Four

Declining economies equate to job losses on a national scale, hence the quantity of foreclosures on the market today. Regional conditions are also important considerations. Community organizations across the country are telling NTIC that home foreclosures are ravaging their neighborhoods, leaving behind abandoned homes, depleted property tax revenues and displacing families. The city of Chicago, which experienced a nearly 20 increase in homeownership in the past decade, has been hit hard by foreclosures. Annual foreclosures started in Chicago increased 74 from 1993 to 2001, from 4,927 to 8,556. Several community areas on the south and west sides of the city experienced over a 300 increase in the number of foreclosures started. There is a similar story from Cleveland where foreclosures started increased 200 in the past four years. In a survey of over 50 metropolitan counties, TRW RED Property Data, a Riverside, California company concludes foreclosures are Fear not foreclosure buyers...

Get Started Today

If you want to buy and sell foreclosures for quick profits. make sure the area you search contains properties that have mass appeal. properties that will sell quickly to the average buyer. Read the real estate section of your local newspaper. get familiar with your areas. Read real estate publications. Talk to people in the industry. Drive by the area and notice for sale by owner and brokers' signs. Go to your library and get more information. Go to auctions and observe. Go to the courthouse and dig. Network with people. Ask questions. Foreclosure investing is a never ending learning process. Conditions, as well as laws, change constantly. Check you motivation and goals. Know why you are doing this. why you want to invest in foreclosures. Is it to make millions of dollars to supplement your current income to buy a house cheap How do you decide to invest is up to you. You can buy before, at, or after the auction. You can hold, rent, sell, or flip a property as you see fit. You can...

Sifte Avpwc

The portal is a private website providing foreclosure resources to the general public. Describing The Foreclosure Process Foreclosure is a process of legal action taken by a lien holder or mortgage holder, as set forth by state and local laws and a contractual obligation. This obligation is spelled out in a mortgage contract or trust deed. The foreclosure action, pre-arranged in the contract, is taken when the terms of the contract are not met. It almost always means that the payments on the loan have not been made. The loan which was used to buy real estate, is not being paid back and is considered in default. Default being the non-performance of a contractual or other obligation. such as not making payments on a note. The ultimate goal of the foreclosing lender is to end the rights of possession of the property owner. Foreclosure then, is a process whereby the lender takes a property back from the borrower who's loan is in default and then sells the property to pay...

State Method Type

Vermont Strict Foreclosure Virginia Power of Sale Washington Judicial West Virginia Power of Sale Wisconsin Power of Sale Wyoming Power of Sale Again however, if an investor bids more than the upset price, the price stipulated in the foreclosure complaint, then the amount paid at auction goes to satisfy the debt owned t the bank first, with the balance going to the property owner. If a property at the foreclosure sale does not sell for the previously established price, if it sells for less and does not cover the amount stipulated in the lien or judgment. the lender may through court action. seek a deficiency judgment. Deed in Lieu of Foreclosure A Deed in Lieu of Foreclosure simply means that the defaulting borrower surrenders the deed to the property, to the lender, to avoid foreclosure. In order to avoid formal proceedings, the deed is conveyed (transferred) from the borrower to the lender. The property owner. knowing that he or she can no longer make the loan payments. and rather...

Appraisal How To Discover Great

6 PROFIT FROM FORECLOSURES 109 The Foreclosure Process 109 The Foreclosure Sale 110 Profit from the Foreclosure Auction 123 Why Foreclosures Sell for Less than Market Value 123 The Foreclosure Sale Summing Up 126 Follow Up with Lenders after Foreclosure Sales 128 Buy from Foreclosure Speculators 137

Are Rent Collections Dependable

Complexes whose hundreds of units persistently suffer revolving-door occupancy, and (2) ill-maintained properties that attract the dregs of the human populace. (I received a Department of Housing and Urban Development HUD foreclosure offering for a 22-unit rental property that not even rats and cockroaches would want to call home. Of the 22 units, only 9 were occupied.)

Why Most Property Flipping Transactions Are under Intense Scrutiny

This type of fraudulent property-flipping transaction usually ends up in foreclosure because the new owner cannot afford to make the loan payments and pay for needed property repairs, too. And in most cases, the American taxpayer winds up getting stuck paying off the government-backed loan that was used to finance the scam.

Renegotiable rate clause

A renegotiable rate mortgage (RRM) is a series of short-term loans secured by a long-term mortgage. The short-term loans are automatically renewable at equal intervals of three to five years each. The mortgage term may not exceed 40 years. The monthly payments are made in equal installments. However, at the end of the life of each short-term loan, the interest rate may be changed. Changes are based on the movement of an index such as the Federal Home Loan Bank Board's most recent monthly national average contract mortgage rate index. The interest rate is the only term'that may be altered. An interest rate modification results in a change of the monthly payment. The new payment amount remains stable until the loan term has again expired.

Credit History Credibility

However, good credit today doesn't necessarily mean what it used to mean. In today's highly competitive mortgage market, some mortgage lenders will accept borrowers who have experienced foreclosure, repossession, and bankruptcy. To qualify with these lenders, you need (1) clean (preferably spotless) credit for the past 18 to 24 months (2) to attribute adverse credit to divorce, unemployment, accident, illness, or other calamity and (3) to persuade the lender that you're now firmly in control of your present and future financial well-being.

Buyers Moving in Early

Another problem with buyers moving in early is that if the sale does not close, it may be difficult to get them out. In some cases the purchase contract would give the buyer much greater rights than a mere lease and you may have to use an expensive court action such as an ejectment or a foreclosure, rather than a tenant eviction, to get them out.

Cant sleep at night if I have too much debt

Apart from the extra leverage and financial gain advantages, debt protects the owner while equity protects the lender. For example, if you have a property worth 400,000 and you owe 300,000, you have only 100,000 in equity at risk from frivolous lawsuits, bad tenants, and even foreclosure. However, if you have that same property worth 400,000 and you owe 100,000, you now have 300,000 at risk. High levels of debt give you more leverage and asset protection.

Financial difficulties

Debt and money troubles are a reality for many sellers. Given the choice between foreclosure and selling, many owners choose to sell. one group of homeowners who need your help are those who've managed to get behind in their payments. They could just be a month or two behind, or they could be much farther behind and face immediate foreclosure. Using Purchase Option techniques you are able to help these struggling sellers and earn a profit too. I went out to meet with Tom, a motivated seller, who was faced with bankruptcy in less than two months. As I sat down and talked with Tom, it became clear that he wanted to figure out a way to keep from having a foreclosure on his credit record as well. We came up with a win-win solution. I signed up a six year lease option deal on the home that would not only save him from having a foreclosure, but would also mean a healthy profit for me. When I left him that day, Tom shook my hand and said thank you for helping him make the best of a tough...

What Are Some Key Terms I Need to Know

Senior Lien This is simply a lien on a given piece of property that has been recorded before another lien on the same piece of property. Another way of stating this is to say that a senior lien is positioned ahead of a junior lien. This means that it is superior to liens that were recorded after it was recorded. For example, a lien recorded in 1996 is senior to a lien recorded in 1997. Lien positions are important issues, particularly in reference to foreclosure.

Investing Case Study

Unfortunately, the building had a very troubled past with many building operators. At one time, Ferdinand Marcos, the infamous president of the Philippines owned it, and during his tenure the building was run into the ground. Eventually, it went into foreclosure and was sold to a member of the Resnick family who had loads of real estate experience, but who still couldn't make it work. He let it go into foreclosure and the holder of the mortgage took it back. Then it went to Kinson Group out of Hong Kong. They put millions of dollars into it, but they also failed dismally. Nobody seemed able to come up with a plan that could transform 40 Wall Street from a loser to a winner.

Adjustable mortgage loan AML

In 1981 the Federal Home Loan Bank Board issued regulations incorporating both variable and renegotiable rate mortgages into adjustable mortgage loan regulations. An adjustable mortgage loan (AML) permits adjustment of the interest rate, which may be implemented through changes in the payment amount, the outstanding principal loan balance, the loan term, or any combination of these variables. (FHLBB Res. No. 8-12069 1981.) As with VRMs and RRMS, interest rates must be decreased as the index decreases, and of course may be increased as the index rises. The lender may increase the loan term up to 40 years to cover interest rate increases (although such an extension is not an option that must be offered to borrowers).

More individuality Condominium ownership

Individual condo owners are responsible for paying their own property taxes, so defaulting on your tax obligations can result in a foreclosure on the unit but not on the entire complex. (For more about foreclosures, see Chapter 15.) Condominiums often are associated with complexes in the suburbs and are thought of as low-rise one- and two-story attached housing units. Condominiums, however, may also be found in high-rise buildings in urban areas.

Shared appreciation mortgage

While there have been numerous advocates of SAM home loans, no large-scale program has been implemented. One cause of this is home appreciation is geographically correlated with income and ethnic racial characteristics therefore, the loan could be inherently discriminatory. A second cause is typical terms do not return a competitive yield to lenders. In income property lending, however, the SAM idea is used as one form of a participation mortgage loan.

Who gets paid first Priority of liens

The first person paid from a court-ordered sale of a piece of real estate is the government. Real estate taxes take first position in the payment of liens. If several liens are attached to the property and one is for unpaid real estate taxes, the real estate taxes are paid first, including any special assessments, or special taxes above and beyond the general real estate tax. Payment of general and special assessment taxes takes priority over all other liens, regardless of when the liens were attached. (For more on tax liens, see One size doesn't fit all Types of liens, later in the chapter, and Chapter 16.) Sometimes, because of too many liens, a property may not be able to be transferred or sold, primarily because not enough money can be gained from the proceeds to pay off the debt. Once in a while, some of the lien holders will take less money just so the property can sell. Quite often it is the second mortgage holder in a foreclosure sale.

Newspapers and Other Publications

To search for potential bargain sellers in the newspaper, also look beyond the classified ads. Locate names of people from the public notices births, divorces, retirements, deaths, bankruptcy, foreclosure, or marriage. Each of these events can trigger the need to sell real estate. If you contact these potential sellers before they have listed with a sales agent, you stand a fair chance of buying at a bargain price. (In addition, you might subscribe to the default or foreclosure lists and newsletters published in your area. Buying foreclosures is discussed in Chapter 6.)

Lender Tries to Resolve Problem

In contrast to the late 1980s and early 1990s, most lenders today give borrowers generous opportunity to reinstate or even refinance their mortgage defaults. That's why even though the current number of mortgages in foreclosure has reached high levels the number of properties actually sold at foreclosure auctions remains low. With more loan workouts, fewer properties go to a foreclosure sale especially as compared to the huge numbers of 10 to 15 years ago. Nevertheless, mortgage lenders (or guarantors) will get the keys to several hundred thousand properties this year. And the number of borrowers who have fallen behind in their payments (and thus are in need of a workout) now exceeds 1.0 million. Given these huge numbers, serious investors can still ferret out foreclosure bargains.

Word on Down Payments

You may receive phone calls from prospective purchasers who want to buy with no money down. Do not allow this, unless you thoroughly understand foreclosure and are willing to take such a high risk. Make sure you adequately communicate to the prospective buyer the minimum down payment you will accept.

Different Ways to Foreclose

Every state has provisions for lenders to make loans using real estate as collateral. Though the property secures the loan and the lender is entitled to foreclose if the borrower doesn't pay, the procedures vary. You should know which laws apply in your state by researching foreclosure procedures at a law library or in the legal section of your public library. The two basic types of foreclosure are judicial and nonjudicial. In a judicial foreclosure, the lender must go to court for a hearing to obtain approval to foreclose when a borrower is behind on payments. A judge or other third party makes sure due process is followed before a lender can auction or repossess a home. In a nonjudicial foreclosure, the lender may hire an attorney or trustee to handle the foreclosure procedure all the way to auction, and the case doesn't go to court. You also need to be familiar with the terms title theory and lien theory. Title theory refers to the modern version of common law mortgage under which...

Existing Mortgages Deeds of Trust

The buyer needs to know all terms of the existing mortgage and wants to pay as little as possible to take over the loan. He would prefer to take the property subject to the mortgage, rather than assuming it, because if assumed, the buyer becomes personally liable to pay it in the event of a foreclosure. The buyer would also like to have the seller pay the assumption fees and to give away the escrow balance, though the latter is very unlikely to be acceptable.

Approach Owners with Empathy

You cannot use some magic system to buy a property from owners facing foreclosure. These owners must contend with financial troubles, personal anguish, and indecisiveness brought on by mental depression. In addition, they have probably already been attacked by innumerable foreclosure sharks, speculators, bank lawyers, and recent attendees of get-rich-quick foreclosure seminars. These owners are living with the public shame of failure. For all these reasons, and more, they are not easy people to deal with. But when you develop a sensitive, empathetic, problem-solving approach with someone suffering through foreclosure, you may be able to come up with a win-win agreement. Just keep in mind that, more than likely, you will compete with foreclosure specialists. A Here's my offer take it or leave it approach will probably antagonize the owners. It will not favorably distinguish you from a dozen other potential buyers (sharks). So develop your offer and negotiations to preserve what little...

The Difficulties of Dealing Profitably with Owners in Default

The promoters of get rich in foreclosures seminars, tapes, and books greatly exaggerate the possibilities of profiting from property owners who face foreclosure. The enticing scenarios imagined by these promoters put you in the picture with high-equity sellers who hold a nonqualifying assumable mortgage. You offer the sellers a few thousand dollars in cash and agree to make up their past-due mortgage payments. The sellers deed you their property and move out. You then put a tenant in the property, collect rents, and pay the property expenses and scheduled mortgage payments. Or, alternatively, you fix up the property, put it on the market, and sell for a fat profit. Regardless of which strategy you choose, buying foreclosures can make you wealthy very fast at least that's the pitch of the foreclosure gurus. Admittedly, such simple deals are great when you can find them. Unfortunately, it's rarely that easy. When you talk with property owners in foreclosure, you're far more likely to...

Tenant Selection Is the Most Important Aspect of the Rental Property Business

Most important aspect of the entire rental property business. Tenants who are mature, conscientious, civilized, and financially responsible adults are the lifeblood of any profitable rental property business. The only practical way for a landlord to ensure that he or she selects only mature, conscientious, civilized, financially responsible adults as tenants is to screen out immature, uncivilized, financially irresponsible, management-intensive people. When landlords fail to properly screen all of their tenant applicants, they lose control of not only their tenants but also their rental property, which often results in foreclosure and bankruptcy. The first step in the tenant screening process is to establish tenant qualification standards, which are based on legitimate business reasons and not personal prejudices. Once standards are set, they must be applied uniformly to all tenant applicants. At a minimum, all tenant applicants should be required to meet the following 10...

Small Towns Big Opportunities

Less than a week after completing training on how to buy foreclosures, Lorne and Angie Saltsman returned to their small town and bought a pre-foreclosure home for 31,000. The home's resale value was 65,000 after 4,000 in fix-up. The legal notice might not use the word foreclosure in the headline. It might say something like Notice of Sale under Power, Notice of Trustee's Sale, Notice of Sheriff's Sale, or Notice of Commissioner's Sale. If you're having trouble finding the foreclosure notices, call the paper and ask them what section to check. Then study that section so you can learn the language of foreclosure notices in your state. In addition to legal notices, subscription services compile and provide the same information. A good way to find the best list provider in your area is to attend a foreclosure auction and check out the other investors they'll all be holding the subscription list to follow up on the properties they're interested in. You can also check Realty Related...

Federal Chartered or State Chartered

Savings banks are members of the Federal Home Loan Bank system, are regulated by the FHLB Board, and must have their deposits insured by the FSLIC. State charters may be covered by FSLIC insurance (about three-quarters of them are, and all in California are insured) others may be insured by state funds. Savings banks may be grouped together with controlling stock interest held by a holding company singly or in groups, they may form service corporations which are allowed to carry out both investment and traditional service functions.

Prequalify Homeowners And Properties

By detailing various negatives in the preceding discussion, I do not imply that you can't make money working with property owners facing foreclosure. You can. But only if you strictly prequalify the homeowners and the property. Before moving forward toward a workout, check its potential by answering the following eight questions 5. Do the homeowners truly want to avoid bankruptcy (or foreclosure) to alleviate their financial distress

Mortgage Collections Personnel

Some foreclosure specialists develop personal relationships with the lending personnel responsible for collecting delinquent accounts. Of course, nearly all lenders prohibit their employees from revealing private information about customers. But we all know that what is prohibited and what is practiced can deviate substantially.

Finding Homeowners Postfiling

Personally visit the clerk of civil court's office and ask to see the list(s) of foreclosure filings.4 4. Go online. Although currently many counties throughout the United States lag behind in the Internet revolution, within a few years even the most backward (or obstinate) will post foreclosure filings on the Web. Remember, as soon as the foreclosure (default) filing hits the public records, competition for quality deals may get heated. Success at this point will depend on how well you present yourself and your offer to the distressed property owners.

Meeting the Property Owners

Here are several suggested approaches to open negotiations with an owner in foreclosure 4 In many counties (such as my own), the clerk of court provides only legal descriptions, not street addresses. This limited information means more work to translate clerk data into usable data. It's also further evidence that the foreclosure process seems designed to minimize the selling price of a property. I would like to pay you cash for your equity, which you otherwise will likely lose in a foreclosure sale. By working together, we can save your credit and you can begin to reestablish your life.

Putting Together Your Offer

Work the numbers on a foreclosure just as you would any other real estate deal. Consider what it's going to cost you to acquire the property, what the seller wants and needs, and what you're going to do with the property once you own it. Your goal in a foreclosure property is to buy at 80 percent of the market value or less. If you can't get the property for that, walk away. When you present your offer, show the seller how it will help her get back on her feet in a short time. If she points out that she has a substantial amount of equity, remind her that if she sells on the open market, she'll likely have to pay a real estate commission of 7 percent and closing costs of 5 to 6 percent as well as go through the hassle of showing the property and the offers would probably be lower than her asking price. Also, she may not have time to do a traditional retail sale, which typically takes six to eight weeks by the time the offer is negotiated and all the details handled. You're offering an...

When the Loan Goes Bad The Borrowers Perspective

People don't buy houses expecting to default on the loan. But life doesn't always go the way we think it will, and sometimes borrowers are unable to keep up with their payments. The reasons are varied job loss, divorce, poor financial management, illness, addictions, and other unexpected economic crises. Whatever the cause, when the house payment isn't made, late notices and letters from the lender begin arriving. Late fees are charged, and before the borrower can deal with the situation, another payment is due. There isn't enough money to make two payments, the lender is refusing to accept a partial payment, and the foreclosure process begins. Once that happens, the borrower has four options (1) sell the home (2) borrow the money to catch up on all the payments (3) file for bankruptcy or (4) wait out the foreclosure process and move when the house is auctioned. Most people facing foreclosure resist the idea of selling their home. They're emotionally attached to it and in a state of...

All Parties Are Better

If this property had completed its trip through foreclosure, only the first-mortgage lender stood a chance of emerging whole. But more than likely, after adding up continuing lost interest payments, late fees, attorney fees, foreclosure expenses, and REO risks and carrying charges, the first-mortgage lender, too, may have ended up worse off. As for the other parties, here's how they would gain from this workout proposal The property owners. Theoretically they lost 5,000 in equity, but as a practical matter, that was 5,000 they were never going to see. Far more important, the workout not only kept a foreclosure entry off their credit record but also rescued them from a possible deficiency judgment. The second-mortgage holder. Again, theoretically the property held enough value to liquidate the full 18,000. As a practical matter, this second mortgagee was better off to take a quick and sure 10,000 and cut its potential losses. Owing to the low prices bid at foreclosure sales, in all...

Doing Your Own Title Search

When you conduct a title search, you'll confirm the legal owner(s), so you know you can legally buy the property from the person you're dealing with. You'll also find out what mortgages are on the property if the real estate taxes are current if there are any liens for special assessments if there are any judgments, federal tax liens or other government liens, or mechanic's lien claims if there are any pending court proceedings that may affect the title (a foreclosure is such a proceeding) any deed restrictions that apply and whether easements are present. If you find any title issues, go back to the seller to see if they can be cleared up. Some will be fairly easy to handle others may take so long to resolve that you won't be able to prevent the foreclosure. For your preliminary title search to determine whether to move forward with the deal, you need only go back to the date of sale on the legal notices announcing the foreclosure. At that point, a title search was done and title...

Home equity credit line loan

By far the fastest growing form of mortgage loan in recent years has been the credit line home loan. It is a second mortgage loan that permits any number of draws or balance reductions, subject to a maximum of 75 to 80 of house value, including the first mortgage loan. The monthly payment typically is the greater of a fixed percentage of the current balance, usually 1 ' 2 to 2 , or a modest dollar minimum. The interest rate is variable, usually prime (or another short term interest rate) plus one and a half to two percent. Draws against the mortgage usually are by check, though in some cases credit cards access the credit line.

Sometimes Losing Less Is Winning

In a foreclosure sale, only the lawyers win. More often than not, everyone else loses. But think what happens when all parties agree to work with rather than against each other. You can create an outcome where everyone walks away better off. Maybe they receive less than they hoped for, certainly less than they were theoretically entitled to, but far more than they could expect from a bidder at a foreclosure auction. Although foreclosure sales typically lose money for lenders, lien holders, and property owners, savvy bidders can turn these sales into big profits. But it's not easy. Bidding blind doesn't work. You have to do your homework.

Make the Adverse Sales Efforts Work for

You might look at the foreclosure sales process and say, Too many potential problems. No way do I want to take those kinds of risks. Besides, how could I ever come up with so much cash on short notice Clearly, that's PROFIT FROM THE FORECLOSURE AUCTION Overcome the Risks of Bidding. Risk looms large to block your path to foreclosure profits. So the key to savvy bidding lies in knowing as much about the property as due diligence demands. Inferior Liens Wiped Out. When you buy a property in foreclosure, all liens inferior to the one being foreclosed will usually get wiped out. Assume that the first mortgagee is prosecuting the foreclosure. You win the auction by outbidding this lender by 1,000. The first mortgagee takes what it's owed. The next claim in line takes whatever money is left. For any specific property, discuss the priority and wipeout issues with legal counsel. But realize that many (if not all) of those pre-foreclosure liens that clouded the title will vanish. This fact...

Balloon Payments and Their Hidden Benefits

There can be a couple of hidden benefits to balloon payments. Should the owner be unable to make the balloon payment, you have the opportunity to refinance the lien. You may want to increase the interest rate or monthly payment, or both. Doing so usually increases your return on the investment. You are then able to set a new balloon payment date and avoid a messy foreclosure.

Bargain and sale deed

The distinguishing feature of this type of deed is that it has no warranties. That the grantor has full title to the property is implied. Essentially it gives no protection to the grantee (receiver of the title to the property). This type of deed sometimes is used in foreclosure and tax sales. You can read about foreclosure in Chapter 15. Warranties can be put into the deed to make it similar to the special warranty deed, and in that case, it's referred to as a bargain and sale deed with covenant against grantors acts.

How to Arrange Financing

After you put together enough information to adequately manage the risks of buying at foreclosure, you still face the problem of financing. How are you going to get the cash to close the sale If you lack wealth or credit, you're probably out of luck. Unless you bring in a money partner, it's difficult to buy at the foreclosure sale. However, if you can even temporarily raise cash for example, take out a home equity loan, get a cash advance on a credit card, sell (or borrow against) stocks, or maybe take out a signature loan you can bid at a foreclosure auction. Then, after the foreclosure paperwork clears, you can place an interim or longer-term mortgage loan against the property (as long as your lawyer or title insurer can clear any liens or clouds) and pay off your short-term creditors.

Profit From Reos And Other Special Sales

When a mortgagee wins the bid at a foreclosure auction, the foreclosed property ends up with that lender as a real estate owned (REO). The lender may retain the property and try to sell it. Or, the lender turns the property over to either the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Veterans Affairs (VA), the Federal National Mortgage Association (Fannie Mae), or the Federal Home Loan Mortgage Corporation (Freddie Mac). In either of these situations, you may find an opportunity to buy at a bargain price, bargain terms, or possibly both.

Handling the Closing Yourself

If you're assuming the loan, all you need to close is a quitclaim deed or a warranty deed (depending on what's appropriate in your state). It's really that simple. You arrange for the seller to sign the quitclaim, pay the attorney handling the foreclosure the necessary amount to bring the loan current and stop the proceedings, get a receipt, and then head to the courthouse to record your deed. You'll have a more traditional closing when you sell or refinance the property.

What to Do with the Property Once You Own It

Millionaire mentor Foreclosure Highlights You can buy foreclosure properties in three basic ways preforeclosure, at the foreclosure auction, and after the foreclosure. One of the easiest and most effective ways to find foreclosures is through the legal notices in your local newspapers. In most cases, the notice will provide enough information to let you get in touch with the owner and discuss possible options. This contact can be made by mail, phone, or in person. Buying a property preforeclosure means that even though the lender has begun the foreclosure process, you step in and buy the property before the foreclosure takes place. Most preforeclosure deals take place in the last week or so before the auction. If the owner doesn't stop the foreclosure by selling the property or bringing the mortgage current, the property will be sold at a foreclosure auction at the courthouse. You can get great real estate bargains at foreclosure auctions. You can also buy foreclosures from the lender...

Locate Specialty Realtors

Once you have identified several advertised foreclosure specialists, give each one a call. Learn their backgrounds. Do they only dabble in the field of REOs and foreclosures Or do they make this field their full-time business For example, when I telephoned REO specialist John Huguenard in Orlando, Florida, he talked with me for an hour and a half about property availability, detailed financing and purchase 2 Also, most lenders don't want to waste time with all of those investor wannabes who have just read a nothing-down book or graduated from a foreclosure guru's seminar. At one point during our conversation, he asked, I'll bet you haven't talked to any other agents who know as much as I do about REOs and foreclosures, have you I've been doing this for twenty-three years. Last year, I sold 90 houses and rehabbed 16 others for my own account.

Hud Homes And Other Hud Properties

If borrowers fail to repay their FHA loans as scheduled, the owner of the mortgage may force the property into a foreclosure sale. Rather than keep the property in its own REO portfolio, however, the lender turns in a claim to HUD (FHA's parent). HUD then pays the lender the amount due under its mortgage insurance coverage and acquires the foreclosed property. Next, HUD puts the property (along with all the others it has acquired in similar fashion) up for sale to the general public. To see HUD's inventory, go to

Potential Conflict of Interest

Although most foreclosure specialists will work to find you a good deal, potential conflict of interest does arise in the sale of HUD homes. First, if you do not submit a winning bid, your sales agent does not earn a commission. An unethical agent could pressure you to raise your bid even if the value of the property doesn't justify a higher price. Second, sales agents may submit bids from competing buyers who are bidding on the same property. If you bid 80,000, an agent could tell another more favored buyer to bid 80,100. You lose. Third, HUD typically pays brokers who submit a winning bid a 5 percent sales commission plus, on occasion, a 500 (or more) selling bonus for designated properties. Again, this reward may encourage the agent to push you to bid high.

D Soldiers and Sailors Relief

The Soldiers and Sailors Relief Act affects mortgages in several ways. One provision states that the court in which foreclosure action appears has the right to stop proceedings in which a civilian mortgagor, after induction to the military, is unable to comply with the mortgage agreement. For example, a mortgagor might be unable to meet his payments due to a reduction of income after entering the military. Another provision states that the mortgagee can collect a maximum of 6 interest while the mortgagor is in the military, unless the mortgagor's ability to pay is not affected by his military status.

Finding a Niche at Auctions

Carroll and Melisa Wimett use a variety of strategies in their real estate investing, but one they like the best is buying foreclosure properties at auction. In Chapter 2, I told you about the first two properties they bought at foreclosure auctions that netted more in one summer than Melisa had made teaching all year.

Review Questions and Answers

Correct answer (C). Eminent domain is the right of a municipality to take property against the wishes of the owner. Dedication is a when a person voluntarily gives property to a municipality. Foreclosure is when a bank or a municipality takes your property for nonpayment of a mortgage or taxes respectively. Escheat is when the state gets your property because you die without a will and without heirs.

Government backed loans fha dva calvet

There are two major categories of loans. One is government-backed loans, where Federal and state governments participate directly in residential loan financing, which include the Federal Housing Administration, the U.S. Department of Veterans Affairs, the California Department of Veterans Affairs, and non-government-backed loans, which are a various city-backed subsidized home loan programs.

Chiropractors Needed an Adjustment and They Got It

Jay C. and Brad R. were partners in a successful chiropractic practice, but they wanted more. After deciding to invest in real estate, they bought a HUD foreclosure for 84,000. It was nearly new and in great shape, and in just three weeks they sold it for 101,500 without putting any money or work into the house.

Mortgage Insurance Premium MIP

Historically, this income was sufficient to allow this agency to be one of the few self-supporting federal government programs, but FHA losses from foreclosures have risen dramatically, putting an unusual strain on its reserves. As a result, the FHA has taken some drastic steps to reverse the foreclosure trend. The costs for securing an FHA-insured loan have been increased to discourage future defaults.

Wraparound and Second Mortgages

The seller's position is exactly the opposite of the buyer's. The seller would prefer a wraparound mortgage to a second mortgage so to be sure the first mortgage is being paid. A buyer could make payments on the second mortgage and let the first go into default resulting in a foreclosure and loss of the seller's interest.

Have a theory on mortgage loans

The lien theory Under the lien theory, the mortgagor retains both the legal title and equitable title to the property. The mortgagee is granted a lien on the property. Legal title is the title or ownership that normally transfers in a property sale. Equitable title, which is fully explained in Chapter 11, gives the holder of the equitable title the right to force the transfer of title when all the conditions of a contract are met. Under the lien theory, the mortgagee must go through the legal process of foreclosure to get legal title to the property to be able to sell it for nonpayment of the debt. (For more about foreclosure, see Shut down Foreclosures later in this chapter.) The intermediate theory Based on title theory, the borrower retains title to the property and the mortgage is a lien. If the borrower defaults on the loan, title is conveyed to the lender. Intermediate theory makes the mortgagee go through the foreclosure process before the property can be sold to repay the debt.

ThE Wave Of ThE Future

The United States recently experienced a sharp increase in the number of homes in foreclosure. This is a tragic situation for many homeowners. It happens for a variety of reasons in short, people get into financial difficulties and can no longer afford the mortgage on their homes. For the investor, however, this means a large pool of highly motivated sellers. One of the most popular techniques involving foreclosures is known as a short sale. A short sale takes place when the lender agrees with the homeowner's approval to accept less than the amount owed on a piece of real estate. Although foreclosures seem to be the buzzword between the years 2008 to 2009, don't overlook estate sales, tax liens, or tax deeds (depending on your state) or for sale by owner properties for leads to motivated sellers. That's one of the many things I love about real estate you can find your own niche that best fits your goals and your level of risk. TIP To learn more about how to invest in foreclosures,...

Quick List Important Elements of the Recorded Message

The recorded message explains the real options to stop a foreclosure. It gives them a true understanding of the reality of their situation. It helps gain the owner's trust. It screens out the deals that would not work, or deals that I don't want. I end up with the best of the best to choose from and pursue. I do that by providing the person with a number of potential, step-by-step solutions to stop his foreclosure, and only mention the possibility of maybe being able to buy his home. By doing that, I am 99 percent more likely to be perceived as an advocate. Truth be told, if I shared with someone a way for him to save his home and I didn't get a chance to buy it that would be wonderful to me. I truly want to be an advocate for people in trouble, not pretend to be. If the real-life suggestions and tips I provide do not work for them, and their situation is irreversible, then I get to be the investor. The message the caller hears is strategically written. To help me create my message, I...

Attract Homeowners to

My name is Dean, and I want to thank you for calling my Foreclosure Scam Warning Line. In just a moment I'm going to reveal to you some scams to watch out for, and then I'll provide you with tips and facts that most lenders and banks don't want you to know. Tips that can prevent the foreclosure process from ever starting, and even stop it once it has started. If you are facing the threat of losing your home to a foreclosure, beware of certain individuals and companies offering to help you out of your difficult financial situation because some of them are scams. or contact people whose homes are listed in public foreclosure notices. Sometimes they direct their appeals to specific religious or ethnic groups. The message continues, and after it gives all the options for preventing a foreclosure to callers, it offers them one more If none of the solutions I have already suggested work, that I may be able to buy their property and prevent a foreclosure. Then, it qualifies them for me. The...

Putting It All Together

Free Foreclosure Help Learn What to Do If You Are at Risk 7 Ways to Stop Your Foreclosure Don't let the bank steal your home and ruin your credit You do have options. In the next 5 minutes you can find out exactly what to do and it's provided FREE Investors use the classified section all the time to find folks in foreclosure, but when people see my ads, they want to know what the secret is, so they call. I also use the same strategy on business cards, larger ads, even postcards.

Eight Ways To Fund A Property

The necessary cash was deposited at a title company in readiness for the impending closing. Mary continued, The bank agreed to hold off the foreclosure till Friday, but the first title company we called told us it would take a minimum of two weeks. That wasn't fast enough. We were discouraged, thinking that we had lost it. But we decided to call some other title companies and finally located one that promised to close by the end of the week.

Real Life Story Marketing Works

They were in pre-foreclosure status and the couple owed only 10,000 on it. This was a great buy because homes in the area were selling for 20,000 to 30,000 more than what was owed on this home. This was Jackie's first experience in buying a pre-foreclosure home, and it fit her investing budget. She was nervous about approaching the owners almost as much as the owners were nervous about getting bank letters.

The broker is exposed to considerable liability if as an arranger of the loan he or she is also appraising the property

A subsequent foreclosure and resale at a significantly lower figure than the appraisal might result in a lawsuit. The lender could claim either negligence or fraud. However, if the arranger of the loan does make the appraisal, it should be well documented to stand a possible challenge by expert witnesses.

Real Life Story Find the Deal and

Brett was a twenty-two-year-old college student who wanted to get involved in real estate but did not have enough money for a down payment. That didn't stop him. He found one property owner who was in foreclosure and owed around 450,000 for the house and was three weeks away from foreclosure. After doing a little work to find comparable houses in the neighborhood, Brett knew that the house was worth between 500,000 and 525,000, so the deal had a good amount of equity. Brett immediately called an investor he knew in the San Diego area and explained the situation, asking for a 2.5 percent finder's fee from the investor. When investing in foreclosures there are a few do's and don'ts to pay attention to.

Who owes whom Assumption and assignment

Over someone else's mortgage loan obligations by assuming a mortgage and not doing so by purchasing the property subject to the mortgage. This distinction makes a difference, if during a foreclosure, not enough money is raised from the sale of the property to cover the debt. i If a property is purchased with the buyer assuming the mortgage, the buyer becomes personally liable for the portion of the debt not covered by the foreclosure sale. Say I buy a house for 200,000 paying the seller 100,000 cash and assuming a mortgage on which there is 100,000 left to pay. I lose my job, can't pay my mortgage, and to make matters worse, real estate values have plummeted. The lender forecloses and can sell the house only for 90,000. The lender holds me personally responsible for the remaining 10,000 of the mortgage debt that the sale of the house did not cover. i If the property has been bought subject to the mortgage, then the buyer is not personally responsible for the remainder of the debt owed...

Low down payment conventional loans

Both the Federal National Mortgage Association and the Federal Home loan Mortgage Corporation recognize that accumulating a down payment and the required closing costs keeps many people from buying a home. To help this situation, both have created several low down payment programs. Although there are minor differences between Fannie Mae and Freddie Mac, the gist of the popular Fannie Freddie 97 programs is as follows

Residential Lease With Option

The said Lessees hereby pledge and assign to the Lessors all the furniture fixtures, goods and chattels of said Lessees which shall or may be brought or put on said premises as security for the payment of the term herein reserved, and the Lessees agree that the said lien may be enforced by distress foreclosure or otherwise at an election of the said Lessors, and do hereby agree to pay attorney's fees of ten percent of the amount so collected or found to be due, together with all costs and charges therefore incurred or paid by the Lessors.

Pay or Lose Tax Liens and Sales

Foreclosure Another way the city can collect unpaid taxes is by foreclosing on the property, which means taking ownership of it and selling it to pay for the unpaid taxes. (For more about foreclosures, check out Chapter 15.) A term associated with foreclosure for unpaid taxes is in rem. In rem means the city takes action against the property rather than against you.

Getting into the Business

Public records contain a wealth of real estate transaction information that provides direct, up-to-date details about prospective clients. These records, usually located at the county courthouse or land records office, provide one of the best sources for finding excellent business leads. In Chapter 6, you learned how to search public records for information on foreclosures. The process is very similar when you're looking for note holders. Use the same search techniques to find properties that are mortgaged but not facing foreclosure. If the note holder is a bank or mortgage company, pass it by. (You'll be able to tell by the name e.g., First National Bank or General Mortgage Corp.) If the note holder is an individual or even two people (e.g., John A. Brown or Sam and Mary Smith), you have a prospect.

Step No 4 Due Dili Gence

A very small percentage of properties may have mortgages held by a bank now administered by the Federal Deposit Insurance Corporation (FDIC). When a bank fails due to insolvency (i.e., not enough money), any loans owed to the bank are administered by the FDIC. If a loan administered by the FDIC is attached to a property on your list, it could mean delays during the foreclosure. The good news is that it is easy to check for FDIC-held loans. With a few simple steps, the risk of a delayed foreclosure due to an FDIC-administered lien is quite remote and easily avoidable. Another risk is that the owner is in the military. It's very difficult to foreclose on an active member of the military. Another difficult owner to deal with is an owner who lives in a foreign country. In this case, the difficulty lies with finding the owner and serving him or her with the foreclosure papers. Yet another risk is that a minor or a mentally disabled person owns the property. This could cause delays in the...

Secondary mortgage market

When a lender makes a loan directly to a borrower, that action takes place in the primary mortgage market. Later, that loan may be sold to a bank, pension fund, or some other investor. The sale of that loan takes place in the secondary market. For example, if a savings bank makes a loan directly to a borrower, it is involved in the primary market. If the loan is subsequently sold to the Federal Home loan Mortgage Corporation, that sale takes place in the secondary market.

Secret You Cant Keep

When you're approaching the end of a redemption period, you may be tempted to start making plans for what you're going to do with the property and hoping that the owner doesn't realize how close the foreclosure is. But you can't keep quiet and just pounce on the property when the final deadline passes.

Three Contingency Clauses That Must Be Included in Your Purchase Agreement

Buyer must approve of the status of the property's existing loans before this transaction can be closed. This clause must be included in case any of the property's loans are in foreclosure. On my third option deal, I got the shock of my young career when I exercised my option and a title search revealed that the property under option was in the throes of foreclosure and just two weeks away from being sold on the Hillsborough County Courthouse steps. Come to find out, the property owners were in the middle of a nasty divorce, and they had stopped making mortgage payments months ago. I tried to get them to sell me their equity so that I could cure the loan default, reinstate the mortgage, and stop the foreclosure action, but they could not agree on a price. And two weeks later the loan was foreclosed on, and my 2,000 option fee earnest money deposit was wiped out in the process. I thought about filing a lawsuit against them in small claims court to try to recover my earnest money...

When the Loan Goes Bad From the Lenders Perspective

Lenders don't want to foreclose on houses, which is why they do thorough credit checks before they make a loan. They're in the finance business, not the real estate business. At the same time, lenders understand that things happen in life that cause someone to get behind on payments. Borrowers with a cooperative attitude who contact their lenders before the loan is seriously delinquent typically find that the lenders are willing to work with them to find a way to get the account current. However, borrowers who simply don't make their payments and don't communicate with their lenders probably find that the lenders will move through the collection process and into foreclosure according to the terms of the loan. As much as lenders don't want to foreclose, they have to protect the investment they've made in the loan. That's why most lenders have a policy of refusing to accept partial payments once a loan reaches a certain past due status. A partial payment can reset the foreclosure clock...

TurninG Lemons into Lemonade

One of the most powerful forms of leverage I have accessed through equity marketing is the ability to exchange as a way of solving problems in my portfolio. For example, as a lender I made a loan against a four-acre horse property. The borrower went into default, and I eventually had to file foreclosure. My loan was junior to the first mortgage, which was also in foreclosure. That meant that I had to assume the first mortgage to protect my position in the property. I wrote a check to the first mortgage holder to satisfy their demands and foreclosed on the borrower. I became the new owner of the property through foreclosure. Following foreclosure, I discovered that the borrowers had left the home in poor condition. It was going to require significant work and expense on my part if I hoped to get the full value upon sale. I was holding what for me was a bitter lemon.

Lien theory

Lien theory is a more modern approach to creating loan security and is used in most states. In lien theory states, the lender is considered to hold a lien, rather than title, against the property for security of the debt. A lien is the right to have property sold to satisfy a debt. In the event of default on the promissory note, foreclosure proceedings are initiated, and the title is conveyed

Title Theory

Another approach requires that foreclosure proceedings must be held, as in lien theory states. This requirement makes these states' mortgage laws equal in borrower protection to that of lien theory states' requirements. The only difference is in the formal wording of the instrument.

Exculpatory clause

An exculpatory clause relieves the borrower of personal liability to repay the loan. Thus, if the borrower defaults, the lender can look only to the property foreclosure for recovery of the debt. In effect, the lender may not sue the borrower on the note or obtain a deficiency judgment, if sale of the property at foreclosure does not provide sufficient funds to cover the loan's balance. Obviously, borrowers prefer to negotiate loans with exculpatory clauses, but lenders are usually unwilling to allow them.

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