How To Avoid Foreclosure

Facing Foreclosure, Bankruptcy? Financial Options In A Failing Economy In Sc Q & A , Faq Tips

If you think you may be facing foreclosure and/or bankruptcy, you need to read the following article on what options may be available to you in this failing economy and pay attention to the surrounding questions and answers which deal with some frequently asked questions and then gives some helpful tips for your assistance.

1)I’m falling behind on my payments; what are my options?

Many options are available to someone who has fallen behind on their mortgage payments in South Texas (or anywhere). Here is an undefined list of different options which can be used to help get the situation fixed.

Loan Modifications

Reverse Mortgages

Hard Money Loans

Loss Mitigation

Forbearance Agreements

Loan Restructuring

Reinstatement Plans

Foreclosure Financing

Lines of Credit

Redemptions

Forbearance Restructuring

Short Sales

One thing that people always need to keep in mind is that you and your lender have a relationship.

The company or person that holds your mortgage loaned you money to buy with the understanding that you would repay them the money, along with interest, over a period of time. The only form of communication that you have is when you send them a payment and perhaps they send you a statement periodically. If you cannot make a payment you need to let them know as soon as possible. Lenders, because of the crisis in the housing market, are more willing to listen and assist than ever. They are finding that they actually have to deal with people rather than just foreclosing on loans, as is the standard practice in a market with a normal or small inventory of homes.

There is one other option that I did not mention. It is ‘ Do Nothing’. The reason I did not mention it is because if a homeowner does nothing, they most likely will lose their home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information. Not the best option.

So, rather than go through that with your lender, call them, tell them your situation and see what they have to offer. If they do not have a plan available, seek outside resources which are readily available.

2) How do I know if I am in foreclosure?

Foreclosure is a legal proceeding. As such there are laws and a structured procedure that must be strictly complied with in order for it to be considered legal in a court of law. One of the mandatory actions that will take place is notification of the mortgagor, or borrower. The lender will deliver a notice of intent to foreclose to you at your last known address which you have provided them with and to the property itself. If you are not able to be found the lender will advertise, in whatever local newspaper or other governmentally designated communication method is required, that they intend to begin the foreclosure proceedings against you and any co-signors of the mortgage.

If you have not received notice and think that the mortgagee has begun foreclosure proceedings you can call your local governmental offices and inquire as to whether there has been any action filed against your property. They will be able to tell you because all legal actions against property must go through and be recorded by the appropriate governing authority.

One other surefire method of finding out is calling the lender.

3) When will the bank auction my new home?

If your house is foreclosed upon, the foreclosing party – be it a bank, mortgage company, individual or other entity – will sell or otherwise dispose of the property by whatever means they feels will bring the highest dollar return, and it will be done as soon as possible.

Please keep in mind that, as a rule, lenders do not want to be owners. Lenders make their money by lending money and collecting interest, not property.

A painter is trained to paint. A lender is trained to lend. A lender who tries to paint does not paint a pretty picture. It is the same reasoning with property. Real property is not liquid in the sense that money is. A banker cannot stick a house into his vault and he can’t wire transfer $10,000 worth of living room. When you go to withdraw $100 from the bank you don’t expect or want the teller to hand you a kitchen sink – you want cash. Once the property is totally foreclosed and title has changed hands it is the best interest of the lending party to sell it for as much as they can get, take the proceeds -money – and get it back into the lending business so they can earn more.

4) How can I find information about buying foreclosures in South Carolina?

Buying foreclosures is simply complex in SC. The simple part is finding them. They are everywhere. The complex part is making sure that what you want is what you are buying.

Here is an article largely drawn upon from Bankrate.com. It gives us a lot of good information on the foreclosure subject and heads us in the right direction.

‘With interest rates at record lows and the stock market looking too perilous for small investors, many people are putting money in an asset they understand — real estate.

One of the best places to invest is in foreclosures and bargain residential real estate. Bargain real estate is mainly property that is priced low because of any number of circumstances including the depressed market which we are in now.

The current market conditions make it a perfect time for a small investor to purchase foreclosure property for their private residence, rental or resale. During economic downturns like we are currently experiencing, all kinds and priced level of homes go into foreclosure, so the notion that foreclosure homes are only available in undesirable areas is inaccurate. Homes on the water, mountains and other affluent areas are part of the mix along with homes everywhere else.

But anyone considering buying foreclosed property should not count on paying pennies on the dollar.

Those deals are out there but are heavily pursued and harder to get.

Yet the savings may be twofold if the property is purchased from the lender who holds the mortgage that’s in default. That lender may be willing to waive some closing costs, maybe even offer a break on the interest rate or the down payment.

Investment of time

A novice must learn to navigate the foreclosure process. But Todd Beitler, owner of the Real Estate Library in Boca Raton, Fla., says the time and effort can translate to savings. "If somebody spends 10 hours a week for five weeks to do research, it’s worth it."

For most consumers, however, the foreclosure process can prove daunting, Reed says. Good buys are available, but they require research, preparation, patience and persistence.

The foreclosure process starts when a property owner falls behind on mortgage payments. Many owners of homes that go into foreclosure have been struggling financially for quite a while before they give up, which may mean that the house has not received needed repairs or general maintenance for a while.

This can be a boon — or boondoggle — for a buyer. Houses in poor condition might fetch bargain prices, but repairs can boost the cost again. The first rule of real estate, "location, location, location," applies in these situations. If there is trash in every room of the house, but the foreclosure is in a good area with high property resale values, hold your nose, walk through the entire house and consider making a low offer.

Reading assignments

When a lender decides to foreclose on a property, a notice of default or a lis pendens (Latin for "lawsuit pending") is filed, depending on the state. This document is a public record, and for buyers, it’s the first step in locating a property in foreclosure. A buyer looking for foreclosures also can buy magazines and newsletters that list properties in default.

Once a home has been located, search public records. Look for liens on the property, since they can drive up the purchase price. Liens typically are placed on a house for unpaid property taxes. Also check assessed values and sale prices of neighboring properties.

Research local state foreclosure laws, since they differ. Some states — such as Florida, New York, Ohio and Pennsylvania — require the lender to sue the borrower and get a court order for the sale of the property, a process known as judicial foreclosure. Other states — including California and Texas — follow the non-judicial foreclosure process, which doesn’t require a lawsuit.

For novice investors, buying from the lender is the safest way to buy. Most foreclosures are taken back by the bank during auction, Beitler says. While well-located homes in good shape generally don’t sell for deep discounts, rundown properties can be sold more cheaply.

Often, the banks hire a real estate agent and sell foreclosed homes in the traditional manner, Reed says. But sometimes buyers can succeed by pestering bank loan officers with low offers.

Buyers might try low-balling the lender’s REO (for "real estate owned") officer shortly before the nonperforming assets have to be reported to supervisors, Beitler says.

The safest deals

Bank-owned properties offer the safest deal for inexperienced foreclosure buyers. There’s no risk of taxes, no liens, no tenants to evict.

A lender that’s eager to sell might be willing to offer attractive terms, says George Tribble, broker of record at Jetstream Mortgage in Oakland, Calif., and past president of the California Association of Mortgage Brokers.

The lender might offer to finance the property at a below-market rate or with a lower-than-usual down payment. Because the bank already has done an appraisal, the buyer might not have to pay an appraisal fee, Tribble says. And lender deals typically include title insurance, which removes much of the risk that accompanies buying homes earlier in the foreclosure process.

Hidden foreclosures

Not all foreclosures are previously owned homes. Some foreclosed homes are new. These homes are not as easy to identify and rarely appear on national lists. In some areas, the slow economy has left many builders of new mid-scale and upscale homes at the end of their construction-loan periods without finding buyers for their homes.

In these cases, the banks that issued the construction loans take possession of the homes and attempt to sell them, using real-estate agents to handle the deals.

These, too, are foreclosures. They are "hidden" foreclosures because no one associated with the sale of these properties will refer to them as foreclosed homes.

More daring investors can find other points in the process to buy homes, like just before foreclosure. The buyer finds a homeowner about to go into default. The homeowner doesn’t want to lose all of the equity in the property, so accepts a portion of the difference between the equity and the home’s market value.

Pre-foreclosure buys offer bargains but demand persistence. That’s because creditors are often hounding owners at this stage. "Trying to get through to the homeowner is virtually impossible," Beitler says.

If the homeowner is contacted, the buyer could be in for a surprise, Reed adds. Homeowners in default might not have phones or electricity, and they might have a variety of personal and legal problems. What’s more, they probably need somewhere to live before they can move out of the property the buyer wants.

This is a high-risk, high-reward proposition, and it’s not for first-time foreclosure buyers, Beitler says.

The auctioneer

Most auctions take place at the county courthouse steps, and they pose disadvantages: Buyers might not be able to inspect the property, and they’ll have to put up the entire purchase price the same day.

The U.S. Department of Housing and Urban Development also runs auctions to unload homes it has acquired through defaults on federally backed mortgages. There aren’t a lot of steals in this process, according to a study by Tim Allen, a real estate professor at Florida Atlantic University.

Allen tracked sales at a HUD auction in Florida in 1998; he found that buyers paid prices very close to assessed value. Beitler agrees that there’s a "frenzy" at HUD auctions that can push prices to unreasonable and undesirable levels.
( http://articles.moneycentral.msn.com/Investing/RealEstate/TheSafestWaysToBuyForeclosures.aspx )

The bottom line is that there is a lot of thought and effort that goes into finding and buying foreclosures the right way. But, when you have done all the right things in the process, the return on your investment will be well worth the effort.

5) Where can I get a list of all the foreclosures in my area?

Quite frankly, where you can get a list of foreclosures in your area depends on the area. Since you specified ‘all the foreclosures’ I will answer directly to that question. All the foreclosures in your area will be processed through a local governmental agency which deals with property records. Many times this is done at the county level. To find out which one, call you city or town hall and ask them which office maintains property records. Once you find out who does it, call them and say ‘I am interested in foreclosed properties. How do I get a list of properties which are either in foreclosure or in the preliminary stages of foreclosure?’ Please be courteous and professional. The personnel you speak with are generally helpful and can be of great benefit to you in your quest.

6) What are short sales?
A short sale is a lender approved sale of a property whereby the lender agrees to accept less money than what the mortgagee owes.

Through negotiation, lenders may agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when and if it can be proven the owner is in financial hardship.

By accepting a short sale, a lender can avoid the lengthy and costly foreclosure process.

This option is much better for the property owner than letting the house go into foreclosure and is the option of choice for anyone that might be losing their home.

7) Can I sell my home if I am in foreclosure?

Yes, you can sell your home if you are in foreclosure. That being said, you must make everyone involved aware that you are in the foreclosure process. The reason being, that the process itself will affect the sale transaction that you will enter into with a contract for sale. It is advisable that you hire a competent lawyer and seek advice from a Realtor to guide you through the unknown pitfalls and legal red tape that can entangle even the simplest looking deals. As a note of encouragement I might ad that selling your home prior to foreclosure is to your benefit as well as the lenders. It will make it that much easier for you to buy another home once you get your financial ducks in a row.

What about refinancing?

If you are thinking about refinancing in order to stave off foreclosure you need to consider some things. The first and arguably most important factor is going to be that, with the refinancing option, there must be equity in the home to be refinanced. Next in line is going to be your credit. If your credit has been taking a beating because you have been late on other payments or not making them at all you will not be able to refinance because the lender will see you as a proven bad risk.

It is important to understand that the new debt is normally at a higher interest rate and there may be a prepayment penalty because of the recent default. This refinancing means completely paying off the entire loan amount plus any default amount and fees.

9) What is the most important thing for a person who may be facing foreclosure to know?

Life can be very hard at times.

When we are dealing with the possibility of foreclosure it causes stress on everyone who is involved – husbands, wives, kids, other relatives, friends and even loan officers.

Keep this in mind because things can get very heated and frustrating. Always focus on resolving the problem in the best way possible with the realization that no one is superhuman. By this I mean that you can only do so much financially. No one can pay out more than they make.

It is advisable to set aside our pride and deal rationally with the circumstances. Our capitalistic society has built-in mechanisms, including bankruptcy, which allow for the unforeseeable circumstances and this is one of the big ones. Look around and see the giant financial institutions that are crumbling around us. These are professionally organized and managed companies and they are experiencing huge losses and bankruptcies. Can we amateurs be expected to do better than the pro’s?

Do yourself a favor and enlist the help of a professional financial advisor. Allow them to sort through your finances in order to evaluate what your status is so that they can suggest which options are available for you. Pick the best one and move forward with it.

Resolving these problems is a slow process. The experience is somewhat painful but can be very valuable as well. Overcome it. Learn from it. Don’t repeat it.

By: Zack

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