Easy Investments in Loan Foreclosures

Real estate loan foreclosures have always been both an opportunity and a challenge for a savvy real estate investor. As homeowners face late payments, defaults, and the possibility of foreclosure, they need more and more help. Real estate investors can make a profit and still help a homeowner out of trouble.

While every foreclosure situation is different, there are some common problems, steps, and solutions. Typically, the homeowner will be unable to make loan payments for a variety of reasons, and once the homeowner has been in default for several months, the financial institution holding the loan will issue a “Notice of Default.” These notices tell the homeowner the amount owed in late payments, plus the amount owed for attorneys’ fees and penalties, and outline a time period and payment schedule to bring the loan back into good standing. day. If payments are not made and the criteria to bring the loan back current are not met, the bank will likely foreclose on the property, claim the owner to vacate the property, and then put the house up for sale or auction. .

The opportunity for real estate investors to help the owner and make a profit exists during the period after the Notice of Default and before foreclosure. This period of time is known as pre-foreclosure. During foreclosure, the homeowner faces a significant problem and often needs a resourceful investor. A homeowner who is unable to meet the payment criteria set forth in the Notice of Default has the option of selling the property and using the proceeds to pay the amount owed or face foreclosure. A savvy and resourceful real estate investor will know to seek out these homeowners before foreclosure to help them out of this situation.

An investor looking for these pre-foreclosure homes should be aware that the Notice of Default is a public document that can often be viewed shortly after filing. In most counties and states, the Registrar’s Office posts the Notice online and at the local courthouse. And once an investor has the owners’ information, they can be contacted through a variety of common real estate strategies, including letters, postcards, phone calls and house calls. This is where the investor can suggest various courses of action.

First, an investor can take over both the property and the loan liability by offering a reduced sales price or taking the loan in full. This allows the property owner to vacate the property without severely damaging their credit score by entering foreclosure. To do this, the property owner will often give up a large portion, or even all, of his or her equity to escape loan and foreclosure.

Once an investor has purchased the property, they have the opportunity to turn it into a profit. Having acquired the property, usually below market value taking into account the owners’ equity, the investor can pay for the property, fix it up, and sell it for a profit. However, this option can require a fair amount of capital, time, and resources. Instead, savvy investors looking to make a smaller but quicker and easier profit can turn the deal over to another investor who specializes in fixing up properties for sale. Also, another option an investor has is to quickly sell the property at an attractive discount. This generates a profit without tying up their money in the property and the transaction for too long, allowing the investor to quickly move their capital to the next project and earn another profit.

Now, if the property does not have enough equity for the above solutions to work, an investor can negotiate with the bank to reduce the outstanding balance on the loan in exchange for a quick sale. This saves the bank from having to go through the foreclosure process, and since banks aren’t in the business of selling houses, they may be biased toward making a quick sale and taking the house out of their unused housing stock. productive. . This solution gives added value to the property to be applied to one of the previous solutions.

Now, of course, there are many other solutions, options, and situations that can arise, but these most typical scenarios demonstrate how a smart investor can quickly turn a profit with just a little time and resources, all while helping a homeowner avoid the side effects. bad credits. from foreclosure and preventing the bank from having to foreclose.