Real estate foreclosures are properties that have been foreclosed on by lenders because the owners, who have taken out loans to buy the properties or have borrowed against the property, have defaulted on the loan payments. Owners can default on loan payments for a variety of reasons including divorce, illness, death of a spouse, and unemployment. Lenders try to work out some kind of resolution with defaulted owners, but will generally initiate foreclosure procedures after three months of default. 

Foreclosure properties represent an exciting way to buy real estate because they can be purchased at discount prices, typically between 10% - 50% below market. These discount prices are possible because the property owners, which can be either the borrower, lender, or government agency (HUD, VA, and Fannie Mae properties) are motivated to sell them very quickly, often at below market prices. As a home buyer, you can buy a foreclosure as a home with instant equity. As an investor, you can buy foreclosures as investment properties with built-in profit margins.   

What types of foreclosure properties are there? 

A foreclosure property exists in three primary stages: pre-foreclosure, auction property, real estate owned (REO). A pre-foreclosure occurs when the lender initiates foreclosure proceedings as the result of a default. If the borrower cannot cure the default by paying off the back payments (arrears) and does not sell the property, it is sold at a public auction. If no one buys the property at the auction, it reverts back to the lender and becomes a Real Estate Owned (REO) property.  

There is also a fourth stage, which can occur on properties with loans insured by a federal agency such as HUD or Fannie Mae, or guaranteed by the Department of Veterans Affairs (VA). When such properties revert back to the lenders, the agencies reimburse the lenders and take ownership of the properties. The agencies then make arrangements to sell the properties to the public.   

How do lenders foreclose on property owners? 

Lenders foreclose on property owners using primarily the judicial or non-judicial foreclosure procedure. States that use mortgages to document property ownership, such as Florida, follow the judicial procedure. The judicial procedure requires lenders to file a court case to prove default before they can foreclose on the owners. States that use deeds of trust follow the non-judicial procedure, which does not require a court case. Non-judicial foreclosures can take up to about 30 days. Non-judicial foreclosures can take up to an additional 30 days because of the court action. In some states, the process can take up to a year depending on the circumstances.   

Can people make money investing in foreclosures? 

People can make money in foreclosures because frequently they can buy the properties at below market value prices. Buying properties at discount prices is the surest and quickest way to make money in real estate. Individuals who are looking for homes can get a significant amount of equity up front with foreclosures. Of course, there are no guarantees, but investors looking for short-term income maybe able to flip foreclosure properties for big profits. And landlords maybe able to buy and rent foreclosures, with positive cash flow, for long term wealth accumulation.   

Do I need a realtor to buy foreclosure properties? 

You can buy pre-foreclosures directly from the property owners before the auction. You can buy auction properties from the foreclosure attorneys or auctioneers at the public auction. You can also buy REOs from lenders after they have taken the properties back at the auction. In all three cases, you can buy the properties without a realtor. 

You do need a realtor to buy government properties. HUD, VA, Fannie Mae, and other federal agencies offer their properties for sale to the public via realtors. The agencies will publish their property lists either on the Internet, in local newspapers, or with local management companies. The properties are usually also published in the Multiple Listing Service, which makes them accessible to realtors. There are many realtors who specialize in government properties and can work with you to submit contracts for purchase.   

How do I find the cash to buy foreclosures? 

You might be surprised to know that there are several sources of investment capital available for funding foreclosure deals. These sources fall into four main categories: conventional financing, partners, lines of credit, and hard money lenders. You can obtain conventional financing from any number of commercial banks and mortgage companies. This type of source can be very cost effective, providing you have good credit. Partners are individuals, including friends, relatives, and other investors, who would be interesting in providing some or all of the money for a percentage of the profits. You can advertise by word of mouth, via the Internet, or in local newspapers.  

You can use existing lines of credit (or credit cards) to fund your deals. You can also use hard money lenders who are in the business of providing loans for real estate deals. Both of these sources require you to make monthly payments on the loan until you sell the property and pay off the balance. Check local sources, including the newspapers, for ads from hard money lenders. 

Many buyers of foreclosed properties also use conventional financing to fund their purchase. Conventional financing sources would be the same sources you would use if you were buying a non-foreclosure property; try your local bank or mortgage broker, both of these sources should have competitive rates and terms.   

What do I need to know in buying foreclosures? 

You should be aware that ALL foreclosure properties are sold in “as is” condition. That means neither the owner, foreclosure attorney, lender, government agency nor their agents are required to do any property repairs. You should therefore expect and be prepared to fix up the property, either by yourself or by hiring a contractor. 

In addition, it is important to arrange your financing in advance of your foreclosure purchase. Contact your lenders or partners to negotiate the terms and conditions of your financing so that you will be prepared to complete the purchase once you negotiate a good deal.   

What happens in Florida? 

Florida carries out foreclosures through court proceedings. The foreclosure process in Florida takes about five months.  A foreclosure in Florida begins when a lender files court action and records a notice of a pending lawsuit (Lis Pendens) against the borrower. The lender notifies the borrower and any other affected parties in person or in some cases by mail or publication. If the borrower does not respond to the court action within a specified amount of time, the county clerk can find the borrower in default and the lender can ask the court to make a final ruling. If the court rules against the borrower, the ruling will include the total amount owed to the lender and the foreclosure sale date. 

The lender is not required by state law to notify the borrower before initiating the foreclosure process, but individual mortgages or deeds of trust might call for this. The borrower can stop the foreclosure up until the date of the sale by paying the total amount owed to the lender. 

The sale date is typically 20-35 days after the court ruling, but this may vary depending on the individual court. The clerk of court issues a notice of sale containing the location, date, and time of the sale.  The notice is published once a week for two weeks, with the second notice appearing at least five days before the sale. 

The clerk usually oversees the sale, which ordinarily occurs at the county courthouse at 11:00 a.m. on the sale date. The winning bidder must provide a 5 percent deposit and pay the remaining balance by the end of the day or a new sale is scheduled a minimum of 20 days later. After a successful sale, the clerk gives a certificate of sale to the winning bidder. 

Within 10 days of the sale, the clerk transfers ownership to the winning bidder if no one disputes the sale.  In most instances, a borrower has no right of redemption after the certificate of sale is issued. 

Contact Courtney Silverman for more information 954-389-3459 at The Keyes Company / Realtors

In a world where we all value higher education, our educational system has neglected one very important subject - Money.  We all set out into the world with absolutely no financial training.
 
As a mortgage consultant, Carol Goldman, has found that more and more people are carrying a tremendous amount of debt and have no savings. Our government released the savings index statistic recently and it stated that as a country we are saving a minus 1.5%.  We start in life full of high hopes to make our fortune but few people really have a plan.  It is just as if we went on trip to a new destination without a map of how to get there.
 
Carol Goldman has acquired very specialized training as a mortgage planner, by working as a financial consultant.  She is curious to learn what financially her customers want out of life.  She then proceeds by helping them plan for those things that are most important to them.  She evaluates how her customers are progressing in their financial plan, and if there is no plan in place, Carol will work with them to create one.  Carol Goldman’s goal is to help all her customers achieve financial independence.
Those goals include:
          Creating healthy financial habits
          Getting rid of Non- Strategic debt
          Building a savings cushion of emergencies
          Accelerate their wealth development
          Having monies needed for life’s events (good and bad)
          Creating enough wealth to retire and pay off home
 
As you can see, coming to me for a mortgage your experience will be very different. I don’t just help you with your purchase, my goal is to be with you for the rest of your life planning and creating the wealth that you will need. I send my clients ongoing pertinent educational information to keep them on the cutting edge of what’s happening in the mortgage industry. Carol Goldman stays in touch regularly with her customers because she wants to be your trusted advisor for life.  Email Carol Goldman 

The recent trend in the Broward County housing market has prompted those of us who care to ask the question – how did so many homeowners get so upside down in their homes? I suppose this question has a three part answer…the declining market, the foolish homeowner, and the crazy mortgage/lending industry. The declining market is out of the average homeowner’s hands. We find ourselves having to place our faith in our legislature to keep our economy strong and in businesses to continue to invest in South Florida. Placing our faith in either, as of late, seems foolhardy at best, and certifiably insane at worst. These two groups of people we are forced to rely on appear to be on opposite sides. The foolish homeowner problem almost always exists. Homeowners always believe their house is worth thousands more than it actually is. Just ask them, and you’ll see. If a house has sold within a 4-mile radius of their house for $600,000, their house miraculously is the mirror image of that house and is suddenly worth $100,000 or more. After all, their house has a 2 1/2-car garage and that house only had a 2-car garage. Based on their irrational exuberance built into the self-assessed values of their own homes, homeowners began using their homes as ATMs to cash out all of the equity in their homes. In some cases, they even cashed out more equity than they had built up in their homes. All they needed to justify it was a job, the notion that the house “around the corner” sold for hundreds of thousands of dollars, and that housing values would continue to rise indefinitely. 

The more people I talk to overwhelmingly point their fingers at the crazy lending institutions that loaned marginal borrowers unbelievable amounts of money. I hear it every day how insane it was for a lender to loan 100% or in some cases more than 100% of the value of the house, interest only, 3-5 year ARMs, with a debt-to-income ratio nearing 50%. What did the lending institution think would happen when (as every market eventually does) the South Florida housing market hit a bump in the road? More and more I see homeowners who (partly to blame) took out these crazy loans, and more unbelievably I see lenders who issued them. The mortgage industry literally bit the hand that was feeding them, and in some cases they ate the whole arm. By setting homeowners up for almost certain failure, the industry didn’t do anyone, especially themselves, any favors. In record numbers, homeowners are unable to sell their homes for what they owe. In record numbers, South Florida homeowners are unable to refinance their homes because of lack of equity. In record numbers, South Florida homeowners are staring escalating interest rates in the face as their ARMs mature. In record numbers, South Florida homeowners are simply walking away from their homes, no longer able to afford them. In record numbers, South Florida homeowners are filing bankruptcy or losing their homes in foreclosure. In record numbers, South Florida homes are sitting vacant – for sale as a bank-owned or REO property. And in record numbers, lending institutions are seeing the fantastic profits realized during the lending boom, slowly melt away.  Only now are people questioning the loans that were given and the criteria used to issue them. The people I talk to are blaming the lenders most of all. They argue that the lending institution, even if not ethically bound not to issue some of these loans, should not have issued them purely for profit. The “lend to anyone” policy of some organizations has served only to turn a slumping South Florida housing market into one that appears to have jumped from the plane without a parachute. What I hear the most is that “they should have known better.” Lenders made obtaining loan approval for huge loans as easy as getting a credit card. The caveat always used to be “buyer beware,” but it seems now that it’s become “borrower beware.” We need to hold our businesses, legislators, lenders, and even ourselves to a higher standard; we need to make wise decisions; and we need to pick ourselves up, dust ourselves off, and move on. We need to practice a little more fiscal responsibility and realize that deficit spending on any level is irresponsible and dangerous.