As a reminder, a foreclosure is a legal proceeding in which the mortgage holder sells the collateral of the mortgage to pay the debt of the mortgage. Many times this results in the mortgage holder taking back posession of a property as a result of non-payment of the loan. If you are interested in buying a foreclosed property, these secrets should help you as you think about pursuing foreclosures.
Mortgage holders want to avoid the foreclosure process
The foreclosure process is done through the local court system and must be done in a legal and detailed manner to ensure the rights of the mortgagee are upheld and protected. All of the details around the foreclosure must be executed correctly...and thus take time AND money. Mortgage holders must spend a lot of money in the foreclosure process and would much rather avoid the foreclosure process all together.
The short sale is a win-win-win solution
Many people interested in purchasing a foreclosed property do not realize that the best time to buy a foreclosure is before the actual foreclosure occurs. The cost of foreclosing on a mortgage, the cost of maintaining a property owned (REO), and the cost of reselling an owned property make avoiding a foreclosure an attractive solution.
A short-sale is a process in which a mortgage holder accepts less than the total amount of the debt to pay off a debt owed. A short sale is a win-win-win solution because:
1. Mortgage holder wins because they avoid a costly foreclosure process
2. Person being foreclosed upon wins because they avoid being foreclosed upon and avoid the stigma, the financial penalties, and the wrecked credit that come with a foreclosure process.
3. You win - because you purchase a property at a bargain, help someone avoid foreclosure, and avoid a lot of the hassles that come with diving into the foreclosure process.
The question is "How do you set up a short sale"?
Step 1 - Find homes and people that are in danger of being foreclosed upon.
One step in the foreclosure process (there may be state-by-state differences) is to publicly announce/notify the public that a foreclosure process is underway. Typically these notifications will appear in your local newspaper and give notice to the community and to the person being foreclosed upon that the foreclosure process is underway. Your first step is to find these notices. typically these notices will contain the name of the person being foreclosed upon and a parcel number of the actual property.
Step 2 - become a detective
This is probably the most difficult part of the short sale process, but the most important. You must use the information that is contained in the public notice to find the property and person named in the notice. You can use the internet, phone book, local public records, etc. to find out who the person is and you need to make contact with them.
Step 3 - make meaningful contact and tell them about the "win-win-win"
Once you find the person being foreclosed upon, you need to convince them that you are there to help them. Be honest, be heartfelt, and be sincere. Remember, this person is most likely in a dire situation, going through family problems, or has met with harsh financial troubles. You are there to convince them that the best thing for everyone is to avoid foreclosure...and if that happens, you all win. It will not be easy...they will wonder why a complete stranger is trying to help them. Be honest and let them know that you want to buy their property and that it will be good for you...but that is only one part of the equation. The goal of this step is to get them to work with you to execute the short sale.
Step 4 - contact the mortgage holder
When you have solicited the help of the person being foreclosed upon, you need to make contact with the mortgage holder. You will need to contact them and work your way through the maze of contacts and get to the foreclosure department, or the deliquency department, or the loss mitigation department. This may be challenging...but be persistent. Once you get to the appropriate person, state your intentions clearly. You may be met with resistance, but let them know you are interested in helping everyone avoid foreclosure and that you are a reasonable person and will make a reasonable offer to purchase the property.
Step 5 - make the offer
You will now need to make an offer to the mortgage holder. Make sure it is reasonable and back up your offer with helpful information that makes sense to the mortgage holder. Based on property condition, market conditions, etc. make them understand that your offer is reasonable and realistic and give them reasons to want to sell it to you. (Some mortgage lenders may require that you involve a real estate agent.)
There are many things about foreclosures that can help in buying a foreclosed property. Armed with a few of these well known facts, you can secure a foreclosed property and perhaps a little more financial security.
