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Preforeclosure Vs. Short Sale

October 8, 2010 By

When it comes to purchasing property at a reduced price, there are many options that an investor can explore. Two of these options, preforeclosure homes and short sales, may seem to be quite similar. In reality, however, there are some very important differences between the two.

Understanding Preforeclosure

When a home is in the preforeclosure stage, the owner has received a notice of default from the lender, but the property has not actually been put into foreclosure yet. During this time, the homeowner may attempt to sell the home in order to avoid going into foreclosure.

In many cases, an investor can get a good deal by purchasing a home that is in preforeclosure because the owner is desperate to sell the home in order to protect his or her credit and to avoid the hassles of going into foreclosure. At the same time, the homeowner really can’t sell the home for less than what is still owed on the mortgage loan, as this would leave the owner in a situation where he or she still owes money on the property. Therefore, you typically cannot expect the owner to accept anything less than what is still owed. Still, in most cases, owners of homes that are in preforeclosure are likely to accept nearly any offer that is reasonable.

Understanding Short Sales

While there are several similarities between preforeclosures and short sales, there are many differences as well. For example, a home that is sold through a short sale is generally one that is at risk of going into foreclosure, but the owner has not been put on notice that the loan is delinquent. Rather, the lender is willing to work with the homeowner in order to make it possible for the home to be sold.

Typically, a homeowner who pursues a short sale is one who is behind on payments, who is unable to make payments and who owes more on the house than what the house is worth. As such, the homeowner works with the lender in order to sell the home at a price that is lower than the current outstanding loan amount.

Obviously, lenders are not great fans of short sales, as agreeing to a short sale means agreeing to lose out on money. At the same time, lenders look at short sales as a better alternative to a foreclosure, which will result in an even greater financial loss. Nonetheless, by working with the owner, the bank and the real estate agent, you could potentially get a very good deal when purchasing a short sale home.

Filed Under: Short Sales Tagged With: , , ,

Get a Good Deal for Less Hassle with a Preforeclosure Property

October 8, 2010 By

While most people are well aware that purchasing a home that is in foreclosure can be a great way to get a good deal on a home, many people are unaware of the deals they can find in homes that are in preforeclosure. The reality is that the preforeclosure stage is often the best time to save some money while also avoiding many of the headaches that are associated with purchasing a home that is in foreclosure. But, what exactly is preforeclosure and how can you go about purchasing a home that is in this stage of the foreclosure process?

What is Preforeclosure?

Simply put, preforeclosure is a term that refers to the time that spans between when the mortgage lender provides the borrower with notice of default and the actual auctioning of the property. In other words, the borrower has been made aware that foreclosure is imminent, but he or she still owns the property.

What are the Benefits of Purchasing a Home in Preforeclosure?

There are actually several benefits associated with purchasing a home that is in preforeclosure. First, since the borrower still owns the home during this stage, you can deal with the owner rather than dealing with the paperwork and other hassles associated with purchasing a home that is in foreclosure. Second, you will have a greater opportunity to inspect the home before deciding whether or not to make a purchase.

Another benefit to purchasing a home that is in preforeclosure is that you are still likely to get a very good deal on the home. After all, the homeowner is desperate to sell the home before it goes into foreclosure, which will cause a significant amount of damage to his or her credit. Furthermore, since the homeowner has retained ownership of the property and is in charge of the sales process, he or she is less likely to intentionally cause damage to the home. After all, the owner wants the home to look very appealing to you so you will be willing to pay a higher price.

Yet another benefit to purchasing a home that is in preforeclosure is that you can take out a traditional loan to purchase the home without worrying about having the actual cash to pay for a home at auction.

How Do I Find Homes that are in Preforeclosure?

The best way to find homes that are in preforeclosure is to contact a real estate agent, preferably one that specializes in selling preforeclosures. There are also several free Websites offering information about homes that are in foreclosure or preforeclosure, so searching the Internet can be another good resource. Just be wary of any site that expects you to pay for this information, as the information you are looking for can be easily obtained for free by contacting a reputable real estate agent.

Filed Under: Investment Opportunities Tagged With: , ,

Exploring Your Property Investment Options

October 7, 2010 By

Are you looking for a great investment opportunity? If you are looking for a way to make some money in the real estate world, there are many different options that you might choose to pursue. One of the most popular forms of real estate investment involves “flipping” the property. But, believe it or not, there are actually several different approaches you can take to flip a property. Here is a brief overview of the options you might choose to explore.

Multiple Investor Flipping

With multiple investor flipping, one person purchases the property and then quickly sells it to another investor, who then sells it to the final customer at a price that is near to market value.

Fix and Flip

While multiple investor flipping typically involves selling a property that is in good shape from start to finish, fix and flip investing is a bit different. With fix and flip investing, the investor purchases a home that is in need of major renovations or repairs. The investor than makes the necessary repairs before selling it at a higher price. Clearly, in order for this type of investment to be profitable, the cost of purchasing the home and making the necessary repairs must be low enough to still yield a profit when the home is sold.

Short Sale and Quick Sale Investments

Purchasing a short sale property and then selling it in order to gain a profit is another form of flipping. With a short sale investment, you may or may not need to make some repairs to the property before you can turn around and sell it. Still, you can obtain the home at a price that is below market value because the person selling the home is in a desperate situation and is likely trying to avoid foreclosure. In some cases, you can also get a good deal on a home being sold by someone who is not looking for a short sale but needs to sell the home quickly, such as someone who is relocating, who is going through a divorce or who is simply trying to sell the home before a short sale or foreclosure becomes necessary.

Filed Under: Investment Opportunities Tagged With: , ,

Top Ideas for Improving a Fix and Flip Home

October 7, 2010 By

Are you looking for some great ways to increase the value of your fix and flip home? The reality is that there are several investments that can be made into a home that can provide an excellent return on investment. Of course, in order to make this happen, you need to make some wise choices when determining the types of improvements you will make to the house. To that end, here is a look at some of the improvements you might want to consider making to your fix and flip home.

Install a Wall

Installing a wall in the right place can go a long way toward increasing the value of your fix and flip home. This is particularly true if the home has a room that is quite large or oddly shaped. Of course, you need to put some thought into where you will place this wall and why you are installing one. One of the least costly upgrades you can make by adding a wall is to create an extra bedroom, though creating an extra bathroom in a home with only one bathroom can be another wise investment. Of course, creating a whole other bathroom is far more costly than creating another bedroom, so consider the current layout and size of the home as well as the features of other homes in the neighborhood.

Updating Bathrooms and Kitchens

The bathroom and kitchen are the two more important rooms in the house. Therefore, it is always a good idea to upgrade these rooms if necessary. Simple upgrades such as re-finishing the cupboards, replacing the faucets, installing new hardware on the cupboards, adding a garbage disposal and installing new appliances can all go a long way toward increasing the value of the property.

Increasing Outdoor Living Space

Taking steps to increase the amount of outdoor living space will also make potential buyers more interested in your property while increasing its overall value. A deck is the simplest addition to make, but adding a gazebo, a patio or an outdoor kitchen are other great additions that will surely yield a great return on investment. Even placing a bench or two in the right spots on the property will be appealing to potential buyers.

Increasing Storage Space

Storage is an issue for every homeowner. To that end, potential buyers will be looking for a home with plenty of storage space. Therefore, you might want to consider expanding a closet if necessary or even adding a closet where one does not already exist. Don’t forget to look outside for additional storage space as well. Adding a shed, for example, can increase the value of the property by far more than the cost of installation.

Filed Under: Fix & Flip Strategies Tagged With: , ,

Staying Out of Foreclosure with the Help of a Mortgage Modification

October 7, 2010 By

If you are facing the possibility of foreclosure, you might want to consider approaching your mortgage lender in order to work out a mortgage modification. With the help of a mortgage modification, you change the terms, the interest rate or the principal balance in order to make the loan more affordable. Before you pursue a mortgage modification, however, it is essential to learn more about the process and how to qualify for this type of assistance.

Exploring Mortgage Modification Options

When it comes to obtaining a mortgage modification, there are several options to pursue. One option is to get the interest rate reduced, which will help reduce your monthly payments. Another option is to change the terms of the agreement, such as changing the loan from one with an adjustable rate to a fixed rate, which will ensure your monthly payment remains the same each month. As such, you will be better able to budget your monthly expenses. Yet another option is to get the principal balance reduced so your payments will be more affordable.

Understanding the Lenders Point of View

While it might seem strange that a mortgage lender would be willing to make these types of modifications, the reality is that lenders realize that it is sometimes better to work out new terms with a borrower than it is to risk foreclosure. Since the average foreclosure costs the lender anywhere from 35 to 50 percent the property’s value. As such, renegotiating the terms may be the best financial move for the lender to make.

Qualifying for a Mortgage Modification

To qualify for a mortgage modification, you will need to gather together a great deal of paperwork. Some of the information your lender will likely require includes:
• Monthly mortgage statement
• Statements from any second mortgages or home equity lines of credit that you might have
• Balances and minimum monthly payments due for credit cards, car loans, student loans and any other debts you might have
• A copy of your most recent income tax return
• Statements on any savings and other assets you might have
• Pay stubs and any other proof of monthly gross income

By having all of the proper paperwork in place and by demonstrating a genuine desire to pay off your mortgage loan, your lender just might be willing to work with you to create a mortgage modification that works for you.

Filed Under: Foreclosure Options Tagged With: ,

Three Steps to Closing a Deal on a Bank Owned Property

October 6, 2010 By

If you are interested in purchasing a bank owned property, referred to as an REO property, it is important for you to have a good understanding of how the purchasing process works. In this way, you will be better prepared to handle all of the ins and outs of purchasing an REO property while getting the best deal possible. By following this three-step plan, the process should be relatively smooth.

Step #1: Make an Offer

Clearly, the first step in the purchase process will be for you to make an offer to the bank. Invariably, the bank will try to sell the property in “as is” condition, but this doesn’t mean you have to agree to this. In fact, when you make an offer, you should at least request that the bank provide a Section 1 pest certification. In addition, you should make certain your offer clearly states that the deal is contingent upon the results of an inspection.

Some questions your agent should ask the listing agent before you make a formal offer include:

• Are there any current inspection reports for the property?
• What work has the bank already agreed to perform?
• How long will it take for the bank to accept the offer?
• Are there any special “as is” forms that need to be filled out?
• How is the offer delivered to the bank?

With this information in mind, you should be better prepared to make a well-educated offer on the property.

Step #2: Counter the Counter-Offer

After making an offer on the property, the bank will most likely counter-offer with a higher price. This is because the bank needs to demonstrate to shareholders, investors and auditors that it attempted to get the best price possible for the property. This does not, however, mean you have to settle for the counter-offer. In fact, you should counter the counter-offer in order to get a better deal. Keep in mind that your new offer will likely need to be reviewed and approved by a number of different companies and individuals, so expect several days to pass before you receive final approval if you have made a reasonable offer.

Step #3: Complete the Inspection

At this point, it is essential to have your inspection completed. This way, if there are unanticipated damages or other problems with the property, you can back out of the deal or you can renegotiate the price accordingly. In many cases, banks will be willing to renegotiate even with a property that is sold “as is” because they don’t want to have to put the property back onto the market.

Filed Under: Bank Owned Homes Tagged With: , ,

Exploring Your Mortgage Loan Options

October 6, 2010 By

If you are interested in purchasing a home, there are several loan options that you might choose to explore. Understanding the various types of mortgage loan options available is essential, particularly if you are planning to refinance your home in order to avoid foreclosure or you are taking out a loan in order to invest in a property. While there are literally dozens of different mortgage loan options available, here is a look at the main types of loans available to home buyers.

Fixed Rate Mortgage Loans

The most common loan for homebuyers is the fixed rate mortgage loan. With the fixed rate mortgage loan, you pay a fixed interest rate for the lifetime of the loan. There are many different variations and terms that can be associated with a fixed rate mortgage loan, but all of these variations involve paying back the loan over a fixed number of years. Some of the most common payback terms associated with fixed rate mortgage loans are 10, 15, 20, 30, 40 and 50 years.

For those who wish to refinance a loan in order to avoid foreclosure, a fixed rate mortgage loan may be the answer. By refinancing the loan for a longer term, you can reduce the payments owed each month in order to make the house payment more affordable. Of course, this will increase the amount of time it takes to pay off the loan and you will ultimately pay more in interest by taking this route. Therefore, it is important to weigh the pros and cons before determining if this is the right answer for you.

Interest Only Mortgage Loans

With interest only mortgage loans you can choose to make payments toward only the interest portion of your loan. This option is only available for a set amount of time, however, and you will still be ultimately responsible for paying off the loan in its entirety. If you are purchasing a home as an investment, this can be a good option because it will keep your monthly payments low until the time comes to sell the home.

Option Adjustable Rate Mortgage (ARM) Loans

Optional Adjustable Rate Mortgage, or ARM, loans are characterized by interest rates that change throughout the lifetime of the loan. With ARM loans, you can select from a variety of different payment options. This is a good option for those who are not concerned having a set monthly payment amount every month for the lifetime of the loan.

Combo/Piggyback Mortgage Loans

Combo/Piggyback mortgage loans are designed to help those who need money to pay for their down payments, as this type of loan allows you to take out one loan for the down payment and one for the remainder of the purchase amount.

Filed Under: Mortgage Loan Options Tagged With: , , , ,

Do You Qualify for a Short Sale?

October 6, 2010 By

Are you considering pursuing a short sale with your home? The reality is that a short sale could be the wise choice for you to make if you are having financial difficulty or are looking at the possibility of foreclosure on your home. After all, with a short sale, you can still get out from underneath your mortgage loan without causing as much damage to your credit as you would with a foreclosure. Still, before you decide a short sale is the answer, it is important to learn more about what it takes to qualify for this type of sale.

In short, to qualify for a short sale, you need to demonstrate that a financial hardship exists. In other words, you must be in a situation that makes it impossible for you to afford your mortgage. To demonstrate that there is a great financial need, you will need to present financial paperwork to the lender. This will likely include pay stubs as well as statements showing your debt and other financial issues you are facing.

When examining your financial situation, the lender will want to take an overall look at your finances as well as your monthly income. This is because, while your overall income may seem to be enough to pay your mortgage loan, you may be falling short each month due to your pay schedule or other factors that are beyond your control.

In addition to demonstrating that it is impossible for you to pay your debt, you will also need to demonstrate that you do not have any liquid assets available to help you pay down the mortgage. In other words, if you have expensive vehicles or other properties that you could sell to help pay off your mortgage loan, a lender is not going to agree to a short sale.

The bottom line is that a short sale is not something that a lender will agree to quickly. After all, when agreeing to a short sale, the lender is agreeing to take a loss on the loan. Therefore, in order to get a lender to agree to a short sale, you need to demonstrate that there is no possible way for you to pay off the mortgage loan and that you will have to foreclose on the property if the short sale doesn’t go through.

Filed Under: Short Sales Tagged With: , ,

Luxury Home Foreclosures: Is it Just Good Business?

October 5, 2010 By

While the number of celebrities, athletes and other individuals who are foreclosing on their luxury homes does continue to grow, it is important to note that this is not necessarily a sign that these individuals are in financial trouble. In fact, according to some experts, putting a luxury home into foreclosure can potentially be nothing more than a business decision that makes perfect sense to the owner.

“Here’s the assumption everybody makes when you’re getting your loan modified – you’re destitute and you’re bankrupt,” said Jim Belliono, who is a real estate investor, in a recent ABC News article. “That’s not the case. It can strictly be a business decision, especially when you’re talking about several million dollars.”

In Los Angeles County alone, ForeclosureRadar.com reports that the number of bank owned luxury homes has tripped during the second quarter when compared to 2007 rates. The delay in high-end foreclosures is likely due to the fact that affluent homeowners were better capable of making it through the first years of the economic downturn.
While the fact that luxury foreclosures are on the rise may seem surprising to some people, the reality is that it is not as unusual as it might seem.

“Higher income people are more likely to go into default than lower income people,” said Richard Green, who is the director of the Lusk Center for Real Estate at the University of Southern California. “They’re more ruthless about their finances than maybe middle-class and low-income people because perhaps they have other resources available to them. They could afford to take the hit on their credit record that others don’t.”

This is not to say that luxury homeowners are completely off the hook when they foreclose on their home. In fact, depending upon the state and the type of mortgage the homeowner has, the lender can come after the owner to pay the difference between what is owed and how much the home sells for. Nonetheless, for some owners, walking away from a multi-million dollar home just might seem like the right financial decision to make.

“It doesn’t have anything to do with being financially ruined, which people assume when you’re not making payments,” said Bellino. “It has to do with a decision to not throw good money after bad.”

Filed Under: Luxury Foreclosures Tagged With: , ,

5 Steps to Purchasing a Pre-Foreclosure Home

October 5, 2010 By

Are you considering investing in property? If so, you might want to consider purchasing a pre-foreclosure home. Of course, purchasing a pre-foreclosure property is not as simple as purchasing the typical home. By following this simple five step process, the process of purchasing a pre-foreclosure home will be far simpler.

Step #1: Search Through Listings

The first step toward purchasing a pre-foreclosure home is to search through the pre-foreclosure properties available on the market. To get a list of available properties, you will need to contact a real estate agent who specializes in foreclosures.

Step #2: Narrow Down Your Options

With a list of properties in hand, you can now narrow down your options according to those that you are most interested in seeing.

Step #3: Contact the Homeowner

Once you have settled on the properties you are most interested in purchasing, it is time to contact the homeowner in order to view the home and to determine if you would like to make a purchase.

Step #4: Do Your Research

After determining you are interested in the property, you will need to do some research on the property. This should include researching the history of the property and making certain there are no hidden back taxes or liens.

Step #5: Inspect the Property

While the home may have looked good to you, this doesn’t mean it is in good shape. Therefore, before you finalize an offer, you should have the home inspected by a professional home inspector. This way, you can be certain purchasing the property is a worthwhile investment. After all, the last thing you want is to purchase a home that requires a significant amount of time, work and money to repair.

The bottom line is that purchasing pre-foreclosure homes can be a good investment, but it is essential to do your homework and to learn as much as you can about the process before you finalize any deals. In this way, you can be certain you are getting a good deal on the home you are purchasing.

Filed Under: Investment Opportunities Tagged With: , ,
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