Buying foreclosure properties is becoming one of the most risky but yet most profitable ways for current home owners to get out from under their current upside down mortgage. People all around the world are starting to see the instantly attainable equity and tactful advantage that exists in buying foreclosure properties.
If you are currently under water in your mortgage then you are in an ever increasing group of homeowners. The current housing downturn has left millions and millions of people owing more on their home than it is worth by today's standards. This is obviously due to the quick decline in housing values coupled with the sharp increase in ARMs and standards with which banks are now judging would be borrowers. There is, however, a glimmer of hope for those willing to dive in head first and throw caution to the wind. It is the cut-throat game of purchasing foreclosed properties. When this is the case then here is the ideal scenario when considering buying foreclosure properties: you manage to purchase a foreclosed property and then flip it and either ready it for sale or move in to it and put your current home up for sale. Either way, you are taking a huge risk, but when you think about the daunting alternative of possible defaulting on your current home, the decision can become easier. Smart home flippers will even put both properties up for sale and then live in the one that remains, using the proceeds to right their financial ship.
Several creative approaches have been employed to accomplish these purchases and I would stress that every home buying situation is different; most have one common thread though: the bank really needs to liquidate that bad loan and they are willing to move the property fairly quickly if the right buyer shows up. The reasoning is that even though the homeowner is under water in their loan, the bank is usually at the bottom of the ocean with their collective portfolio. Needless to say, the bank would like nothing more than to start selling off the loans that are nothing more than splinters in there sides. If you can spot the right deal then perhaps you can go from a negative equity position to a positive one, or at the very least a balanced financial stance. And although the bank needs to move pretty quickly, that does not mean that they will make it easy for you. No, no, not by a long shot. But get some good advice and learn the routine and then you could be on your way to possibly freeing the financial shackles that the system has enslaved you in. Let's dive in.
You have a bad loan on your home. You know that you cannot pay the monthly mortgage for much longer, and you surely cannot sustain any sort of standard of living if you do manage to make the payment. Catch 22 if you ask me. If you make the mortgage payment you can't afford your car and if you cannot afford your car payment then you cannot go to work, which means you cannot continue to earn money, which obviously means that you cannot afford your house. Maybe you have already stopped paying. Thousands lose out to the loan default monster every single day. Here is the dilemma: You are in a negative position on your home (or are about to be in one) and the bank is in a negative position on the dozens of homes that they just took back from a builder who was building speculative housing. Now, every assumption here rides on the hope that the housing market will eventually levitate back to normal. Also, this scenario that is being practiced is largely for those who have not defaulted yet because if you have already defaulted then it is unlikely that you would qualify for another loan to use on buying foreclosure properties.
In order to make themselves more liquid, banks are fire-selling the homes that they have on inventory. First step for the prospective foreclosure buyer is to get pre-qualified. Nearly all banks require corporate addendum, letter of credit, or some solid financial instrument that says you are not just creditworthy, but already have be approved. Creditworthyness is no longer in vogue as far as banks are concerned, and neither is rolling the dice. Banks are no longer able to package loans and sell them off in bundles the day after closing; typically, the loans that banks issue nowadays are stuck with that bank. They will service the loan and they want positive assurance that you will pay them. In return, you can get deep discounts on a home (upwards of 20% to 60%). That kind of savings comes at an additional price, however: you usually must accept the house as is and without warranty. No biggie, those home waranties just about worthless anyway. Ever try getting your water heater replaced under the waranty? Nearly impossible. A good inspection by a professional home inspector will usually be just as good. And, if the home inspector finds any thing wrong with the house you can sometimes use that as a bargaining chip to get the bank to lower the sales price.
Search for bank properties on the Multiple Listing Service. Usually you local realtors will be of invaluable service, especially in a bank owned deal. Make sure that you choose an agent that has done bank foreclosure properties before because you do not want this to be the first time for everyone involved. Again, the primary idea is to get pre-qualified, then purchase a steeply discounted foreclosed home, get it inspected, close on it. Many times the bank that sells you the house will also provide the loan to you. Then, put both houses up for sale and (yours and the the one you just purchased) and hire a good qualified realtor to assist you in the sale of either. It is also a good idea to check with your accountant for the tax implications given either sale. There are many more nuances to buying foreclosure properties in an effort to get out from under your existing mortgage so please be sure to do proper research and seek qualified help and if all else fails you might try to find debt relief.
