Amelie Mag asked:


Foreclosed homes are regularly set on the market by the two major home lenders: government agencies and banks. Be they government foreclosures or bank foreclosures, what matters most is that they can be purchased at expenses lower than their real market value. This is why homebuyers or investors generally are in haste as soon as a reliable foreclosure opportunity is listed. After having investigated the real estate market and its potentialities, homebuyers must move quickly if they want to grasp this temporary chance. In what follows we will see some of the basics and advantages of opting either for government foreclosures or for bank foreclosures.

The most popular government agencies that frequently market foreclosure properties are as follows: 1) the U.S. Department of Housing and Urban Development (you are probably already familiar with HUD foreclosed homes); 2) the U.S. Department of Veteran Affairs (for the well-known VA foreclosures); 3) local agencies of taxation; 4) the Federal Deposit Insurance Corporation (FDIC – the department dealing with foreclosure sales); 5) the Internal Revenue Service (IRS – once again the segment dealing with foreclosures). However, the market of government foreclosures is led by HUD foreclosures and VA foreclosures.

In any case, the point is that with government foreclosures one of the above mentioned government agencies is holder of the property’s title. As a rule, they will place any foreclosed property at auction. The buyer’s advantages are basically drawn from bidding opportunities generated by auction circumstances: the potential buyer’s chance to set a limit for the house value, the certainty over the time interval spent to acquire a property, the possibility to evade prolonged negotiations with the former homeowner. As with any auction, government foreclosures are purchased if the bidder’s offer is appropriate. Also, your involvement in government foreclosures auctions needs to be mediated by a certified real estate agent who is regularly rewarded a 6% bonus for having successfully sold the property. The real estate agent’s indemnity is an additional figure to the sum you place as a bid.

To what concerns bank foreclosures, there are three major ways of purchasing such properties. One of them is in pre-foreclosures. In this case, you will need to act promptly, because there is actually very little time up until a property in a pre-foreclosed stage is transferred to foreclosure terms. So before properties actually become bank foreclosures, the active, smart homebuyer/investor – who has previously undergone a serious investigation of an area’s real estate market – will know to move in the direction of negotiating directly with the distressed homeowners. If pre-foreclosure attempts fail, the next step is an auction.

With bank foreclosures, the auction is required by the banks whose lends haven’t been acquitted on time. In such circumstances, the homebuyer/investor could try to overpass the bank’s bidding offers. Yes, the bank will also bid in such auctions, interested in stepping further along the process of profitably selling foreclosures. If the auction is won by the bank, the property becomes an REO (real estate owned) foreclosure property. This is the third way in which you could purchase bank foreclosures. When you are interested in REOs, you will negotiate directly with the bank. The main advantage of the potential homebuyer/home investor is that this is the most certain manner (and one of the fastest) of acquiring a foreclosed property. You will need to make an offer, but be careful: the offer should be commonsensical, don’t expect a bank to accept a discount of 50%, even if we are talking about foreclosures. Most often, you will get a 10%-20% lower price for an REO foreclosure.

In the end, the key toward purchasing foreclosures, no matter the entity selling them, is given by two stages: careful real estate market investigation and promptness in action when the time comes to place your offer. Remember that the market of foreclosures, no matter how advantageous, is highly competitive, since many homebuyers/investors are interested in it.

LawFirms.com asked:


The Federal Deposit Insurance Corporation (FDIC) has compiled information from different sources on the rate of foreclosures in America and the outlook is not promising. According to the report, the Mortgage Bankers Association (MBA) reported that every three months 250,000 families enter into foreclosure in the U.S. That translates into one out of every 200 American homes. Mortgage default has reached epidemic proportions in our country and an ever-increasing number of families are facing homelessness or at least the loss of their homes and financial uncertainty.

HUD Suggestions to Avoid Foreclosure

U.S. Department of Housing and Urban Development (HUD) offers some tips to try to avoid foreclosure, they include:

Do not ignore the problem – The further behind a borrower gets in their mortgage payments, the harder it will be to reinstate the loan and the more likely the borrower will lose his/her home. Contact the lender as soon as possible – When a borrower realizes he/she will have a problem making the mortgage payments he/she should let the lender know immediately. Lenders can offer options to help borrowers through difficult financial times. They do not want to repossess a home. Open and respond to all correspondence from the lender – Lenders usually include information that may help a borrower keep his/her home in the first notices they send out. This information could help the borrower avoid foreclosure and it usually includes default prevention options. Know the rights afforded to a borrower – A borrower should review the loan documents so he/she may have a clear understanding of the lender’s options if he/she cannot make the mortgage payments. Learn the local foreclosure laws and action timeframes of the jurisdiction where the residence is located. Understand the foreclosure prevention options – A borrower can contact his/her lender to find out what loss mitigation or foreclosure prevention options are available to help them avoid foreclosure.

HUD suggests that a borrower prioritize his/her spending if they are having trouble keeping up with their mortgage payments. They recommend that the borrower’s first order of priority should be healthcare and after that, it should be to keep his/her home. They should review their finances to see where they can cut spending in order to make the mortgage payments. The individual should make a budget and sacrifice nonessential spending until he/she can catch up with the mortgage payments. HUD also recommends sacrificing assets in order to keep the home. The liquidation of assets such as a second car, jewelry, or a whole life insurance policy can help reinstate the loan.

Steps to Foreclosure

If a borrower defaults on his/her mortgage, the mortgage holder can typically initiate foreclosure according to the timeframe specified in the mortgage agreement. That period of time can vary but it will be specified in the mortgage agreement. There are two basic types of foreclosures recognized across the country but there are also regional foreclosures that are used in some jurisdictions. Most foreclosures are conducted in state or local courts but a few are conducted in Federal courts. A foreclosure is a legal action and all parties involved must be notified, even though requirements for notification vary from one jurisdiction to another.

Any profits from the sale of the property are used first to satisfy any outstanding taxes then to pay the outstanding mortgage and any legal costs of the lender. After that any funds that are left are use to compensate other liens against the property. The borrower is allowed the remaining proceeds if there is any money left after all debts are satisfied.

Types of Foreclosures

The different types of foreclosures include: Judicial Foreclosure – This type is available in all fifty states and it requires a court-supervised sale of the mortgaged property. A Judicial Foreclosure allows the borrower a one-year “right of redemption” where he/she can buy the property back from the bidder. This type of foreclosure allows the lender to file a deficiency judgment against the borrower for the balance of the money owed if the proceeds from the sale fail to cover the mortgage. Foreclosure by power of sale – This type is allowed in twenty-nine states if a power of sale clause is included in the mortgage agreement. Foreclosure by power of sale involves the sale of the mortgaged property by the mortgage holder without court supervision. Typically, this is a more expedient way of foreclosing on a property. This type of foreclosure does not allow the mortgage holder to seek a deficiency judgment against the borrower. Strict Foreclosure - This type is handed down through a decree and is only available in a few states. In this type foreclosure, the property is not sold but the borrower is ordered by the court to pay the amount owed within a specified period. If the conditions are not met, the lender has the right to take possession of the property. Once the lender has the title, the property can be sold to satisfy the loan. If the profits from the sale do not satisfy the amount owed, the lender can file a deficiency judgment against the former borrower. A Trustee’s Sale – This is an easy form of Foreclosure and a trustee under the stipulations of a Deed of Trust performs the sale. In this process, the borrower grants a trustee the power to sell the property through a trustee’s sale if the borrower defaults on the mortgage. Any proceeds from the sale are dispersed according to the priorities outlined in the deed of trust. This is a quick and economical way of foreclosing on a property but it does not allow for a deficiency judgment against the borrower. Reasons for Foreclosure

Hundreds of thousands of U.S. families are losing their homes to foreclosure every fiscal quarter making this a foreclosure and financial plague on our society that will be reeling for years to come. The FDIC published information from a study conducted by the Homeownership Preservation Foundation (HPF) on some of the reasons for the high rate of foreclosures in America. The study suggests that many U.S. households are at a financial tipping point and many families are on the verge of losing their homes.

The economic tipping points for American families in danger of losing their homes outlined by the HPF include:

Thirty-two percent are because of the loss of employment. Twenty-five percent are because of a healthcare emergency in the family. Eighty-five percent of households are behind one mortgage payment. Fifty percent of households are behind two payments. Most Americans households do not have any savings, do not have any credit available, and their extended families are in a similar situation. Most U.S. homeowners are first-time mortgagors, and most home mortgages are less than three-years old. Many American households have refinanced their homes two or three times.

The HPF estimates that forty-three percent of U.S. households live beyond their means and that almost half of all homeowners in this country spend more than they earn. The foundation calculates that approximately fifty-two percent of American employees live paycheck-to-paycheck and that roughly forty-two percent of Americans do not have enough liquid assets to support themselves for the recommended three months should they have a financial crisis.

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