Foreclosures

Foreclosures are one of the most sought after and misunderstood real estate investment opportunities. We all see commercials on TV saying how a foreclosed home was purchased for a few thousand dollars and how it now rents for some great amount of money per month. Purchasing a foreclosed property is a complicated process, one that should be approached with care and with an experienced Realtor®. Foreclosures are on the rise in this country and there are many opportunities to capitalize on defaulting owners. The biggest challenge for today’s foreclosure market is that many homes have more debt than value. Buying a property for less than is owed is called a short sale. The short sale is a great way to buy a property for less than it’s worth. Short sales have to be approved by the lender in the first position on the deed and also any subsequent mortgage holders. Because of this it can be easier to accomplish a short sale on a property with only one mortgage.
Buying a foreclosed home is a complicated process. When a homeowner starts to default or not pay their mortgage their lender will usually give them around 90 days to make the payments current. After that approximate time period the lender will file what is known as a “Notice of Election and Demand” or NED.

This document is filed in the county where the home is located and starts the foreclosure process. The NED starts into motion a rolling time frame. The first deadline is another period in which the owner/mortgagee has time to bring payments current or “cure” as it is known. After appx. 118 days if the owner/mortgagee has been unable to cure then the home will be sold at public auction. It is at this point where an investor can bid directly on the home. The lender will typically have a representative at the public sale that will bid a minimum of what is owed to them. They will usually bid the amount of their outstanding mortgage plus fees and expenses incurred during the foreclosure process. If the lender is the highest bidder and ends up owning the home it is referred to in the industry as an REO or Real Estate Owned. An REO will then typically be offered through a traditional listing process with a local broker at a market value.
Sometimes the best way to capitalize on the foreclosure situation is to find a Realtor® that stays current with properties that are in trouble or near foreclosure. If the property is actively listed, your Realtor® can assist you in negotiating a great price or even assist you through the short sale process. Contact TRU Real Estate if you are interested in finding a foreclosed or distressed home sale