Foreclosure Court Order Bank Distress Sales Guide
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Foreclosure Court Order Bank Distress Sales Guide
When there is a financial crisis it opens a new booming industry, the purchasing and selling of foreclosure property. You will eventually find out that there is a huge profit in dealing with undervalued foreclosure property when the statistics show that out of every one hundred mortgage loans, at least two are under foreclosure. This will be a sign of an increase compared to previous years and there will be indications that it will be steadily on the rise.
Real estate investing is the way to go to if you want to earn huge profits since prices of properties have increased dramatically over the years. Now the downside of this is that fewer people are able to afford the good ones since their prices have gone from inexpensive to prohibitive in the past three years or so. And this being the scenario, plus add the chances of the interest rates going up and the ever-changing bankruptcy laws, foreclosures in great numbers are very likely when all these conditions occur. And when foreclosures start going consistently on the rise, the opportunity to cash in on them has also greatly increased People who cannot afford to make payments anymore on their mortgage would seek better foreclosure rates rather than be burdened with continuing debt.
The Foreclosure Court Order and Bank Distress Sales Guide
Will help you understand the laws governing foreclosure. Read it and you would be in a better position to play in the foreclosure and mortgage market and earn more than what you have imagined. So unless you are a seasoned foreclosure investor who knows all the ins and outs of the foreclosure court order world and all its attached laws and by-laws, this foreclosure guide is right for you. By reading this Foreclosure Court Order Bank Distress Sales Guide, we will make yourself an expert and you will see how you can start making profits from purchasing and/or selling foreclosure properties. This guide will give you a more concise and better overview of the whole process of foreclosure property dealings and how to effectively negotiate and purchase these properties.
This very profitable and lucrative money-making business is not yet known to many people and this would be the perfect time for you to jump in on it and make more money before foreclosures become too popular.
Have you noticed that the real estate business attracts numerous investors whether the market is up or down? The reason behind this is because even if when market prices are high (let’s say the average home market price is $900,000.00), you can purchase a property at below the market price and sell it for a profit (For example purchase at $800,000 and sell at $850,000). And the same goes for a down market, just purchase a property below the market price at that time and again sell it for profit. (eg. The if the average home price is $800,000 – buy at $650,000 and sell at $700,000). The reason foreclosures are so easy to profit from is because when the market is slow, they are almost always sold at below the market price – so you are almost guaranteed a profit!
The Advantages of Real Estate Investments
Different investment opportunities are always available to anyone that has the right financial backing. Investing in stocks and bonds could be one if you know the stock market well. Finding the ideal broker to make your placements could be a real challenge though. Going into retail business could be another option, but you really have to know the “ins” and “outs” of the industry you are going to. These could be a big gamble on your side. Historically, the real estate industry has outperformed the stock market in terms of growth. This could be another window of opportunity worth looking at. It is simple to understand because you just have to buy when the market is down and prices are low. You can hold on to your property or you can let go of it when the right opportunity comes or when prices are already high.
Long-Term Increase In Value:
The real estate business can give you unique benefits like price appreciation. In the short term, the market may go up or down, but over the long term, you will have a safe investment because holding on to your property will almost guarantee an increase in value. Having a large portfolio of properties is a key secret to building massive wealth.
Leverage Your Money:
A good benefit you can get if you go into real estate is its ability to be used an asset to borrow money against. You can go to a lender or bank to borrow funds to purchase a house or property of your choice. The cash you have may go as down payment and mortgage the property with the bank or lender paying the full acquisition price. If the interest you pay on the mortgage is much lower than the return you make from the rental property, then you are profiting month after month by using someone else’s (the bank’s) money and only a little of your own.
Tax Advantages:
Tax benefits can also be enjoyed when you purchase real estate and making it your permanent home. If you acquire it through a loan, the interest you pay on your mortgage can be tax deductible. The property taxes you pay for your house can also be an income tax deduction. Depreciation cost of your property will also give you added benefit because theoretically its value lowers because of age and you can reflect it on your tax return.
Ongoing Rent Income:
In a “down” real estate market, the opportunities for a prospective investor are plenty. Spotting a condo you can rent out while living in your current home will give you added income. A low priced house located in a nice neighbourhood will also be a good rental prospect. Rental properties provide good income opportunities and give you equity on the property itself at the same time. Remember, on top of getting rental income, you are still getting appreciation from the property over time.
Having full knowledge of the benefits of real estate acquisitions, we can now look at bigger opportunities like the foreclosure market.
What Types Of Foreclosures Are There?
Foreclosures may be quite familiar with most real estate property owners or investors but many still don’t know how they really work. Before you invest your money into real estate, it is of utmost importance that you understand the actual processes of foreclosure. A real estate investor is no different from a new homebuyer when it comes to acquiring the full understanding of the real estate industry which includes the foreclosure process. This may not be difficult to understand because practically almost all provinces adhere to similar basic foreclosure procedures.
Foreclosure:
Foreclosure is a procedure where a lending situation or bank repossess or take hold of the property because the owner or borrower fails to make the payments according to the terms of mortgage or loan. There two types of foreclosures, the judicial and non-judicial.
Judicial Foreclosure:
Judicial foreclosure is a legal procedure done through the courts to obtain a judgment for the foreclosure. When people purchase a property and they don’t have enough money to purchase outright, they borrow from a lender or bank. In exchange for lending the money, the bank will hold a lien against the property. If the borrower does not make payment according to the terms, the loan goes into default and lender can exercise the lien against the property. This will be made after several notices are given to the borrower to make the payments current. If no attempts are made to make repayments, then legal procedures will follow. After the court judgment is made, the bank/lender will now have legal possession of the property so that they can start the selling of the property to get back the loan capital. Legal documents will be filed including the lis pendens or a notice that legal action is pending on this particular property. Another term for this legal action is mortgage foreclosure.
Non-Judicial Foreclosure:
Non-Judicial Foreclosure is a procedure does not require court action because the title stays with the lender until full payment on the loan is made. At the start, the lender issues a deed of trust which can include a power of sale clause on the property. This involves a sale of the property by the mortgage holder without court supervision. When the borrower doesn’t make the loan payments according to the terms, a Notice of Default is sent to the borrower. After a specified holding period, a Notice of Trustee Sale can be posted on the property. This process is much faster than a Judicial Foreclosure because the owner of the home does not have a redemption period (or has a very short one) to get back up to date with payments.
Pre-Foreclosures: (before the auction)
Properties with Notice of Default are called pre-foreclosures. These properties may be bought from the homeowners or from the financial institution holding the mortgage before the start of the foreclosure process. The homeowner can be relieved of his financial liability through this procedure and the buyer can obtain the property at a lower cost.
Bank Auction Foreclosures: (at the auction)
The properties with Notice of Trustee Sale are categorized as auction properties. The banks or lending institutions place a foreclosed property into an auction to get back the loan capital on the defaulted property. Prices may start from the outstanding amount of mortgage which can be an opportunity for buyers to get the lowest cost for the property.
Bank Owned Foreclosures: (after the auction)
If there are no bidders for the property for sale or the minimum bid is not met, the property becomes a bank owned property. The bank or lending institution can then start selling the property through a brokerage firm and get back their capital for the loan.
Pre-Foreclosures – the First Phase of Foreclosures
Bank-Owned Foreclosures vs Pre-Foreclosures
Bank-owned foreclosures are great for home buyers who want to save on their next home purchase, they allow you to buy foreclosure homes AFTER they are repossessed by the bank and listed with a Realtor.
With our listings at www.vreg.ca you will find:
- Homes typically 23% below market value
- More property selection
- More property information
- Easy property access/viewing directly through an agent
Pre-Foreclosures are ideal for aspiring real estate investors who want to flip homes for fast profits or flip/buy real estate with no-money-down or with no credit. Pre-foreclosure listings allow investors to buy foreclosure homes BEFORE they are repossessed by the bank and listed with a realtor.
With listings at www.vreg.ca you will:
- Find homes up to 50% below market value or more
- Get a FREE help and support from an experienced real estate agent. No commissions paid
- Buy foreclosures before the public know about them
- Find deals that are perfect for creative financing (no-money-down) deals such as rent-to-own, assignments-of-contract and lease-options
More About Pre-Foreclosures
Here we will talk about the first stage of the foreclosure process. During this stage, the homeowner has missed at least a single schedule of payment and is now considered as a delinquent on the loan.
A pre-foreclosure is also known as Notice of Default or Lis Pendens, which means that a formal warning has already been sent to the borrower on a loan with delinquent payments. The Notice of Default and the Lis Pendens are actually the same things, only that each one signifies whether the loan is secured by a mortgage or a deed of trust. The moment the trustee files a Notice of Default, it automatically becomes a public record.
Understanding Pre-Foreclosure Home Sellers
In order to effectively understand homeowners, it is essential that you understand how they think. Usually, people who are faced with a negative event caused the delay in his mortgage payments. That negative event could be a recent divorce, an illness, a job loss, and so on. These things cause the homeowner to delay his payments, making the situation worse for himself. Only when you fully understand the current situation of the homeowner can you effectively help him to get out of a possible foreclosure.
2 Reasons Why Pre-Foreclosure Home Sellers Need You
Since it is unlikely for a distressed homeowner to have a good credit background, a foreclosure will ruin his credit history all the more. This will make the purchase of another home or establish other types of credit very challenging in the future. If you can purchase their home (quickly and at a discount), you will be able to help them save their credit.
Also, if their property becomes foreclosed, they may lose their equity in their home. However, if you are able to pay the homeowner some amount over their mortgage balance, it may be more than what they will probably receive in an auction. This is because the owner’s equity is often eaten up by the expenses, commissions and the legal fees prior the auction itself. You can help them save this equity by purchasing their pre-foreclosed home.
Making The Offer
Perhaps the greatest challenge of buying any property in pre-foreclosure is getting the attention and the commitment of the homeowner. And since the Notice of Default is made known to the public, other investors could be running after the owner as well. There a lot of investors that send a postcard or write a letter indicating their interest in the property. This can get you the seller’s attention, but you can do even more. For example, after the seller has responded to your letter or postcard, speaking with the owner over the phone or face to face is even better – this is the best way to gain the confidence and trust of the owner, making him decide to your advantage.
In most cases, the best option for an owner is to sell the home and be rid of the hassle altogether. However, there are a lot of property owners who still hang on to their property as long as they can. But with the auction date drawing near, the homeowner will be likely to get motivated to close a sale before the actual auction. So we recommend that you keep your communication with the homeowner – make sure he knows that you will readily buy the house given your terms.
Always be polite and courteous to the homeowner every time you speak. We advise that you take a consultative approach by demonstrating an understanding of the owner’s dilemma with the goal of reaching a mutually beneficial agreement.
Analyzing The Property
It is important that you do your homework before you make an offer on any property. That means that you should have a thorough analysis of the property – have a detailed title search to make sure that the property has a clear title. Also, evaluate the loan-to-value ratio of the property. If there is minimal or no owner’s equity, then doing the deal will require more creative solutions. If you are buying the residence to flip and not as a primary residence, make sure that you do the right calculations of all the costs before signing any deals.
Closing
Before you finally close the deal, make sure that you check that the property has a clear title. Never give out money until your real estate attorney has made sure that the titles are clean. If all things are good, you will both have to sign a Real Estate Purchase and Sale Agreement. This is the part where you arrange your finances and make sure that the foreclosure process has been stopped. Assuming that everything goes as planned, then you would have just bought a property below its market value and made an enormous profit!
Court Auction For Homes – the Secondary Phase of Foreclosures
A foreclosure is plainly understood as the legal process that is instituted by the lender in a mortgage loan after a borrower’s default or failure to pay. The end of the pre-foreclosure phase of the property is signalled after a homeowner has failed to get back up to date with their mortgage payments and the bank takes legal possession of the property. Then, the next stage follows in the form of a court auction. The Lender hopes to quickly recover his/her capital by selling to the highest bidder in this court auction
If a sale is made, proceeds will be disbursed accordingly to: the lender holding the first mortgage; the second and third mortgage-holders if any, and then the homeowner should there be any remaining amount from the sale made less his other remaining obligations such as charges and claims against the property.
Everyone knows that an auction is a good venue for one to buy a property at really bargain prices. However, for first time purchasers or bidders, there are a few things you need to know before getting into an auction and these are as follows:
Preparing for the Foreclosure Court Order Auction:
- Make a “title search”. If you don’t want any trouble with the property you are about to bid on, be sure that you check all records relating to it. If you don’t you might discover too late that there are unpaid personal taxes, civil lawsuit judgments or state and federal tax liens that would not warn you from determining it to be a sound sale. You might pay more than what you bid for if this becomes the case
- Be financially prepared. You might want to have ready cash or cash equivalent as this is required at the auction. When a bidder wins, he is made to deposit a 5-10 percent at the end of the auction and the balance is paid within a few days after.
- Observe in auctions prior your bid. Make sure you are familiar with the process and you will get the feel of the water in an auction as many people too often get caught up in excitement over several bargains and this clouds their rational thinking and make them unwise bidders.
The Opening Bid:
The opening bid is often determined through the total remaining loan balance, court costs, interest and back taxes, legal fees and liens and judgments. This should be made known as the winning bidder will be obligated to fulfill these. The trustee establishes the opening bid prior the auction proper. Should no one go beyond the opening bid, the property will be taken back by the lender and this becomes Bank Owned.
How to Bid:
Bidders approach auctioneer one at a time with cashier’s check or cash on hand and bidding over a previously recorded amount is not possible unless you have an additional check or cash to show. One’s capacity and limitation to bid will be determined by the auctioneer in accordance with your check or cash proof. Remember that before the opening bid the trustees read all legal description and terms of sale for the property so you will have a technical idea of what you’re bidding on.
The Winning Bid:
A winning bid is signalled by the third strike of the auctioneers’ hammer and hence you will be expected to make a 5-10 percent deposit at the conclusion which is non-refundable. The remaining balance is expected to be settled in between 1-30 days.
Note that owner can still succeed in the redemption period to buy back the property as mandated by the province’s law however in most cases given the poor financial standing of the owner, he is less likely to get in the way of your owning the property. Redemption period varies in provinces and some even have none.
Conclusion:
Without a doubt, a foreclosure auction is an excellent venue for you to buy properties for only the price of what is owed the mortgage which means that you will be looking at a sale that is substantially below its market value. What can better bargain there be? Just remember to look for an auction with a little or limited competition.
Home Repossession By Banks and Bank-Owned Foreclosure Court Order Properties
Foreclosures happen when a person violates the mortgage terms of a mortgaged property with a lending institution or a bank. The most common reason is the lack of ability to make regular payments for the mortgage. The mortgagor or bank can then redeem the mortgaged property. When it is foreclosed, it is then auctioned off but if there are no bidders, it will be regarded as a bank owned foreclosure property. The bank will then be the legal property owner and, since banks are not in the real estate business, it will be considered a non-performing asset for the bank. The bank is in the business of lending money and NOT in managing real estate they would want to get back the capital they lent by selling this particular property at the earliest time possible. This would create great opportunities for prospective investors acquiring properties at a discounted price. The property may be sold for a fraction of its original price. Demand for housing grows relative to population growth, therefore, real estate can be a reliable and tangible form of investment.
Why Banks Are Motivated To Sell Their Foreclosed Properties:
Banks sell their bank foreclosure properties mainly because they are into money business, therefore, non-performing assets such as foreclosed homes give them no return on their money. Getting their capital back is their main objective which is the reason investors have a good bargaining advantage. Good terms and conditions may be agreed upon between the bank and investor/buyer. Property taxes and maintenance expenses of the foreclosed property are additional burdens to the banks. In addition, the risk of property damage incurred when the property is left vacant without persons to look after it is also a reason they want to sell quickly.
Advantages Of Buying Foreclosure Court Order:
Low Prices:
Banks normally do not want to lose money but they prefer to sell fast so investors can get advantaged prices which can be more in their favour. Some may think that the properties are in a state of disrepair or totally damaged, but the fact is that many properties are in extremely good condition.
Clean Titles:
Prospective real estate investors can have several advantages if they acquire bank foreclosure properties. These usually have clean titles with no liens and encumbrances against the property except only with the bank which makes paperwork easy to process. Usually, banks have several foreclosed properties at their disposal and a good research at their database will give prospectors a wide variety of choice. Banks also treat most bank foreclosures as standard house loans making them more attractive to investors.
Favorable Terms:
With the main objective of acquiring back lent capital tied up in the non-performing assets, the bank may exercise their flexibility to terms and conditions which can be favourable to the prospective investors.
Advantages Of Buying Foreclosure Court Order:
Since bank foreclosures are so attractive to investors, a property may have many buyers interested in purchasing it, and therefore there may be competition in acquiring the property.
Buying The Foreclosure Court Order:
Having clean titles and with fewer problems related to the property that may be encountered in the future, the properties may attract lots of prospectors that may push up the price of the property. So many prospective buyers also may be to one’s disadvantage but these can be resolved by establishing a good relationship with lending banks. Banks with plenty of available foreclosed properties have a database available for everyone who is interested.
The Difference between Tax Deed Sale and Tax Lien Sale
If a homeowner fails to pay property taxes to a tax collection office in a locality, his property may be subjected to a tax sale. This is not considered as a penalty imposed on the delinquent taxpayer but rather a means in which government can continue to collect taxes systematically. There are two kinds of tax sales that the agency mandated by the government can carry out. These are tax deed sale and tax lien sale. Both can be achieved by the holding of a public auction.
Tax deed sale:
The tax collection agency may enforce the sale of the property of the delinquent homeowner for the purpose of having the taxes paid out of the income from the sales. The property is subjected to a public auction in which the lowest bid should not be less than the amount taxes owed including interest and the expenses incurred in selling it. Provinces that implement tax deed sales are usually compelled not to hold an auction for a grace period of several years. But when such period expires and the sale is completed through an auction, the homeowner can no longer have his or her property back.
Nevertheless, there are certain localities that provide six and twelve months respectively as redemption periods. If the homeowner is ultimately able to comply with the requirements, including paying the taxes and penalties, he may be able to recover the property.
Tax lien sale:
Does not require the property to be disposed at an auction. Instead, the right to collect the taxes as well as the interest is sold to interested entities. Therefore, it is no longer the tax collection agency that would run after the tax-delinquent homeowner but the private entity which was able to buy the tax lien. This tax lien buyer can actually extract more profits from this arrangement because it can impose interests to the property owner. Although, this entity has to pay the tax collection agency with the amount usually equal to the property owner’s unpaid taxes, it can actually recover early and increase its profit margin through interest rates. The lien’s purchaser loses nothing if the homeowner fails to repay because it can just decide to foreclose the property. In this regard, investing in a tax lien sale is certainly a win-win situation.
One major difference between a tax deed sale and a tax lien sale is that the former has lesser instances of selling. This is primarily because it requires a higher amount of money than the former. Buying a property certainly entails bigger expenses that buying liens. However, for people who wish to invest in real estate, a tax deed sale is indeed a worthy approach. They can simply buy the property for less, since most of the price is merely composed of the unpaid taxes. But they can resell it at a much higher price later. Nevertheless, investors who do not wish to be troubled with disposing real properties will certainly opt to buy tax liens instead.
FSBO Properties (For Sale By Owner)
Here we will talk about For-Sale-By-Owner or FSBO properties. For this type of property, the seller acts as an agent and handles the sales process directly with the buyer or the buyer’s agent. In an FSBO transaction, the seller does not pay any listing commission for his property.
About 5-8% of the national residential real estate market is composed of FSBO properties. Homeowners sell their properties by themselves in order to eliminate the sales commissions charged by most real estate agents. Selling a property without going through an agent saves the homeowner about 3-6% of the transaction price.
Although selling a home without an agent can save a lot of money, there are also some risks. But those risks pave the way for you. This is because while a lot of FSBO sellers are able to accurately assess the value of their property, there are still some who has no idea of their property’s true value. So if you are patient enough to sift through FSBO listings, you will be able to find an under-priced property.
FSBO home sellers are also unable to reach to a wide audience, and that is where you come in. They will be unable to include their home listing in the Multiple Listing System (MLS), which gives their home a worldwide exposure to potential buyers. Unless a homeowner uses an agent, a property will be less likely to reach all prospective homebuyers in the market. And as a result, the price of the property is unlikely to reach its maximum selling price.
Although it is not easy to measure the exact savings of purchasing for an FSBO, we recommend that you include these listings in your search in order to find a great deal on a home.
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