Jeff Adams

The Foreclosure Business



Posted: Thursday, October 08, 2009

by
RealEstateWebProfits.com

So what exactly is a foreclosure? By definition, a foreclosure is the action that is taken by a lender or mortgage holder against a borrower when the terms of the contract or agreement are not met. The borrower is in default of the loan and the lender has the legal right to gain possession of the property in an attempt to recover the loan.

All foreclosures are not the same. There are several types of foreclosures such as mortgage foreclosures, trust deed foreclosures, and strict foreclosures. A mortgage foreclosure is when a borrower gets a loan from a bank and a promissory note is issued. This note outlines the terms and conditions of the loan and states the monthly payment amount. The promissory note also defines the due date of the monthly payment. A mortgage contract is then initiated which establishes security for the loan as the collateral for the debt. The lender, also referred to as the mortgagee, is given certain rights just in case the borrower cannot pay. A lien is placed on the house or property until the loan is paid off.

Another type of foreclosure is a trust deed foreclosure. This type includes a legal contract where the deed to the property is placed "in trust" with a third party, which is usually a title or trust company. Then there are strict foreclosures. During this type of foreclosure, the lender legally and rightfully owns the home or property. The lender has the right to order to borrower to vacate the property as soon as his/her right to redemption has ended.

There are several causes that can ultimately lead into a home falling prey to the prey to the foreclosure process. Increased interest rates, unemployment, and unstable economy could all be contributing factors. In addition, the reasons as to what lead to the foreclosure could also be on a more personal level such as necessary work related relocation, death or disability, health and medical problems, divorce, or a failed business venture. There are a myriad of causes that can result in a distressed homeowner.

There are several methods of buying a home or property that is in one form of foreclosure or another. Investors can buy directly from the homeowner which eliminates any bidding against other potential investors. Or, buying at a public auction is an option. When buying at auction, any negotiating does not involve the homeowner. Purchasing the real estate owned property (REO) after the auction is yet another method. Here, you would deal directly with the bank or other lenders and the agents that represent them.

The foreclosure process officially begins when payment is not made on the agreed upon monthly due date. The date is typically the first day of the mortgage payment billing cycle. Missed payments can usually be negotiated with the bank or lender to be paid at a later time. In doing so, late charges are accrued after the grace period. Between day forty five and sixty, the lender sends a certified letter, or letter of intent, demanding payment. The letter also states that the borrower is in breech of contract, and the home or property is potentially a subject to foreclosure. After ninety days, the case is referred to the foreclosure department and the necessary legal documents are filed.

As investors, taking advantage of these homes and properties can lead to substantial wealth and financial freedom. There are only three parts to the plan. First, is finding the deals. Next it is stepping up and making an offer and getting it accepted. And last is cashing it in, whether it is wholesaling and giving it to the investor for a check, renting it out, or selling it in the future.

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