If you have ever faced a foreclosure in your life, you must be very well aware of the negative connotations it carries with it. It is not an experience anyone willingly goes into. A foreclosure is very distressing and frustrating to say the least. It causes damage to your reputation in the market by devaluing your credit ratings.
While on the other hand, for a real estate investor on a look out for newer and better ways of investment, a foreclosed property can be a very promising option. The same phenomenon has two faces. Which side of the equation are you?
I am Jeff Adams, one of America’s most popular and dynamic real estate consultants. In this article, I will provide you some in-depth knowledge about ways to deal with and possibly even avoid this problem altogether. I will also offer some tips about the opportunities for an investor in the foreclosure property market.
What is a foreclosure and how does it work?
A foreclosure is the legal action taken by a lender, such as a bank, against the borrower. Sometimes, in spite of his best intentions and efforts, a person who has borrowed money from a bank for purchase of a house or other property, fails to meet the demands of regular repayments. This invites the legal procedure we all know as a foreclosure.
Does this treatment seem a bit unfair or harsh to you? After all, the borrower may have some genuine reasons why he is not in a position to make the timely repayments. True. There can be many realistic reasons ranging from some kind of a financial crisis he may be going through or relationship turmoil or even a serious disease or death of someone close.
But although these are all valid and real reasons, the lender has to safeguard their own interest in order to prevent their own loss. And so by taking the action of foreclosing the property, the lender makes it legally binding for the borrower to surrender the property to him and evacuate it. This way, the lender can resell the property and secure the balance payment and any other legal expenses involved.
Ways to deal with an imminent foreclosure
Prevention is always better than cure. Avoiding foreclosure is obviously the best way to deal with the problem. But how to do that? Following are a few general tips:
- Pay your repayment installments in time. That, quite obviously, is the best solution of all.
- Contact the lender as soon as you can and explain your situation honestly and provide any financial details they ask for. All this may induce them to rethink about the foreclosure decision and come up with some mutually satisfying solution.
- Contact your nearest real estate consultant or agency. They are the best source of information regarding any free help by Government agencies or community organizations.
- Use the resources available online to get help and advice regarding foreclosures.
- Ask the lender to revise your repayment plan based on your current situation. They can even temporarily reduce or suspend the repayments.
- On some recovery in your financial situation you can get the debt refinanced. The repayment period can also be extended to make it manageable.
Foreclosure investing: A golden opportunity for smart investors
Investing your money in foreclosed properties can be a lucrative way of investment. You purchase the property at a greatly reduced price, revamp it to some extent and sell it at a much higher rate. Undoubtedly, a great way to earn money!
But all that glitters is not gold. There are many common misconceptions about the investment in foreclosed properties and many self-professed experts support them to a great extent. Although it is true that this can be a great opportunity to a wise and experienced investor, it is equally important to know that, like almost every other field, this avenue also takes some serious hard-work and study to make a success out of it.
Following are some important tips I want to share with you to make your investment in foreclosed properties a profitable one.
- Before investing in any foreclosed property, learn about the market value of the property you want to put your money in. Check local MLS listings and use your own previous experience and commonsense to determine it.
- Understanding the legal aspects is equally essential. Learn about the laws related to foreclosures in that particular state as they differ greatly from state to state.
- In case you do not have enough funds to finance the purchase, find some investor who can.
Whether you are someone who is looking for ways to deal positively with a foreclosure or a new investor who wants to make the most of this investment avenue, using the above tips as guidelines will surely help in finding a satisfying way to fulfill your intentions.
