Buying Foreclosure Homes – Won by you by Offering the Homeower Options
In teaching workshops on how to buy foreclosure homes (often listed on a foreclosure auctions report), I often write about the markerboard in big bold letters, “Gain They’re Trust to shut More Deals”.
The principle of gaining the trust from the homeowner threatened with foreclosure is a deal-maker. If they trust you, they’re more likely to accept your offer. Besides that, if you have earned their trust by explaining their choices to them, then when they choose to let the home go to auction where it will likely end up on a foreclosure auctions report (and you win it) they’re much more likely to vacate the home without a fight.
1. Work with their Current Lender
Forbearance: An agreement between the lender and the borrower that reinstates the delinquent loan because the homeowner will put up an initial lump sum of the total delinquency and pay the rest over a period of time.
Loan Modification: A change in any of the terms of the original note. Including decreasing the interest rate, re-amortizing the remaining balance, extending the word of the note.
2. Work with a New Lender
Refinance: Where a new lender loan the borrower monies to repay existing debt. This method is generally open to borrowers that face a brief setback in their financial situation and can prove that they can afford the new mortgage payment. Most financial institutions will not loan to people unless they’ve the above mentioned criteria and at least 20% equity in the residence.
Junior Mortgage: In which a new lender will offer a second loan or junior lien to make up any back payments, additional fees and other charges essential to reinstate the loan. Rates are typically 12%-18% and terms are Five to ten years.
3. File Bankruptcy
Bankruptcy is really a way for people who owe more income than they can pay right now, to either work out an agenda to repay the secure creditors with time in Chapter 13 filings, or eliminate (discharge) most of their bill in a Chapter 7 filing. As the debtor is working out a plan, or the trustee is gathering the accessible assets to sell, the Bankruptcy Code provides that creditors must stop all collection efforts against the debtor. What happens for your bills, debts and house is going to be controlled by the Bankruptcy Code and the Federal Rules of Bankruptcy(the dog owner will NO longer have control over some of their assets). Bankruptcy will have a serious impact on the credit lives for the next 10 years.
4. Sell Their Home
List having a Realtor on the MLS (Mls)- Due to the short foreclosure period in Texas, listing their house with an real estate broker and being able to close within A 3 week period is a very unrealistic task due to the new buyers financing. The process of lenders approving the buyers credit, appraising the house, completing underwriting, reviewing title, getting a new survey, getting payoff demands and drawing documents–can take 3-4 weeks to accomplish (assuming no problems pop up). Just because the property is under contract and scheduled to close will NOT stop the auction.
Sell to an Investor- Selling their house to an investor who offers ” cash at closing”; no new loan contingencies; no repairs to become made (AS IS); fast escrow; a for sure sale providing a fresh start with reputation and integrity intact could be their best option. Although the investor’s price is less, the investor can salvage the seller’s credit, bring loans current, rebuild seller’s credit if you are paying the sellers debt promptly every month. This is a far better solution than doing nothing and losing everything at the foreclosure auction.
5.Giving Up and Letting it Go:
Deed-in-Lieu: Borrower voluntary conveys the title (property) back to lender in lieu of the lender foreclosing. Most lenders prefer to go through with the auction and clean title by extinguishing inferior liens.
Let it Visit Auction: Obviously, nothing good can come from this, the owner loses their home with no money, credit problems, difficult to find new housing due to past history and the lender can sue for just about any deficiency.
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