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Posts Tagged ‘real estate owned’

What You Should Know About PreForeclosures

March 13th, 2009 by Matthew C. Keegan | 6 Comments | Filed in Consumer Tips, Home Financing, Home Selling

For the homeowner who is behind on house payments, the threat of foreclosure looms large especially as months pass without a payment. foreclosureIn some markets owners may fall behind by two or three months before foreclosure action is taken, while in other markets — particularly those with a high percentage of foreclosures — it could take many more months to occur.

Regardless, if you have fallen behind on payments, then your home loan lender has every right to take back your home.

Notice of Default & a Grace Period

Once legal action has been initiated by the lender, both parties enter a pre-foreclosure period. This means that the days from when the Notice of Default has been received up to the court date, a state-mandated grace period kicks in. Also known as a “default cure” period, this timeframe is designed to give homeowners a remedy before foreclosure sets in.

In most cases, few homeowners will have the means to sufficiently satisfy the legal complaint against them, specifically come up with all of the funds owed to the lender which would prevent foreclosure.

Four Resolutions To A Pre-Foreclosure

Once pre-foreclosure has been started it must be ended in one of four ways:

  • The homeowner reestablishes the loan by paying off the default amount during the grace period set by state law. This grace period is also known as pre-foreclosure or “default cure.”
  • The homeowner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan, thereby avoiding having a foreclosure included in his credit report.
  • A third party comes to terms to purchase the property at a public auction at the end of the pre-foreclosure period.
  • The lender takes ownership of the property, usually with the intention of selling it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).

Most homeowners go through a drawn out warning period before they lose their home. Usually, several notices have already been sent by the lender reminding borrowers that funds are due, including phone calls, email messages, perhaps a visit to the home seeking collection.

During the default cure period which averages thirty days in most states, homeowners can still attempt to raise the funds needed to satisfy the lender’s complaint or entertain offers from interested buyers.

Investors make a habit of learning which homes are in pre-foreclosure and will contact owners if interested. Homeowners are urged to retain legal counsel before agreeing to any sale which may also require the approval of the lender especially if their debt isn’t satisfied with the sale.


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Foreclosures: Wise Investment or Money Trap?

July 7th, 2008 by Matthew C. Keegan | No Comments | Filed in Home Buying

I was having a discussion with a friend last week when our conversation turned to the housing market. Bleak news upon bleak news for some people, but not for my friend.

home foreclosureInstead, he has been eagerly scouring the area for foreclosed homes and is of the mind to buy one or two at deeply discounted prices, fix them up, and selling each at a substantial profit. Though the local housing market isn’t as strong as it was just a year ago, people are in the market for a nicely kept ranch or colonial that costs less than $250,000, a price that is common in our area of the country.

On the surface, such an idea seems interesting especially since my friend knows how to fix just about anything and has an eye that can assess what it will take to get a home market ready. What our conversation also revealed was some inexperience in locating foreclosed homes and the best process to snag one at a price that was sensible.

Though I am no expert in the buying and selling of foreclosed homes, I have found some resources and tips to streamline the process, information I have forwarded to my friend and am willing to share with you as well:

Search Online — Several websites provide information about real estate owned (REO) properties, bank-owned foreclosures available where you live. Redfin.com, RealtyTrac.com and Foreclosures.com each feature listings of homes banks would rather not own. As the saying goes, “banks are in the habit of managing money, not property.” Therefore, if you do your research right you could offer the bank substantially less than the home’s market value especially when calculating the cost for repairs.

Repairs, Maintenance — My friend has an excellent grasp of what costs are associated with making repairs and has a good eye to inspect and find problems. Not every person in the market for a foreclosed home has that talent, necessitating that a home inspector be retained to help find these problems for them. In addition, a contractor will probably be needed to help oversee this type of project.

Use a Broker — Unless you have the skills to bid for a foreclosed home at an auction, you would be better dealing with a broker when searching for a foreclosed home. Some banks will only deal with professionals in the first place, while a broker can give you access where none would be available otherwise.

I do not know whether my friend will go ahead and snap up a foreclosure or two, but I have no doubt that he is now better equipped to handle this type of transaction if and when the opportunity arises.


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REOs — Are They Worth It?

March 14th, 2008 by Matthew C. Keegan | 1 Comment | Filed in Home Buying

home buy

Home buyers looking for a bargain are taking a close look at the housing market and are witnessing some unique opportunities. For one, prices have fallen — dramatically so in some areas — opening up home buying to people with very good credit and the cash to put down on a home.Even in local markets where home values have remained steady there are additional options for consumers looking for a bargain including REO — real estate owned property. Let’s take a look at REOs to learn what they are and what is involved with buying one.

REOs – Real Estate Own Properties

REOs are real estate owned properties which are owned by the lender — mortgage company or bank — that weren’t sold at foreclosure. The previous owner is no longer on the premises as foreclosure action transferred the home to the lender.

In most cases REOs present a serious drain on the lender who is now holding onto a piece of property that is typically worth less than what is owed to the bank especially when attorney fees, loan balances and maintenance costs are factored in.

When To Consider An REO

If an REO property fails to sell at foreclosure, the lender will try to sell the property again, sometimes through a realtor or by means of an auction. In this case, an REO is worth considering especially if the following criteria have been met:

  • Most of the liens or expenses related to the home are not included with the sale. This means that if property taxes haven’t been paid for some time or loan related expenses haven’t been recouped, the bank will not pass these expenses on to you. Instead, the lender will absorb most of the costs and sell the home to you as is.
  • The home is salvageable despite needing extensive repairs. One big reason why a foreclosed home might not have sold is that the house is in poor shape. Perhaps new roofing, drywalling, flooring or some important structural work needs to be done to the house before it can be inhabited. Buyers must factor in the costs of these types of repairs when bidding on an REO.

REOs, An Opportunity For Some

In housing markets which have seen many foreclosures and a dip in home values, REOs are plentiful and great buys can be had. Banks are not in the business of holding and maintaining property, therefore if you do your homework and offer a fair price, an REO can be one way to profit from the current down turn in the real estate industry.


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