Buying Properties From Homeowners That Have Defaulted On Their Mortgage Loan

Buying properties that are in default can be a great investment opportunity for real estate investors

. Foreclosure is a situation that wants to be avoided by both the lender and the homeowner. Before the foreclosure actually takes place, action known as Lis Pendens is activated. This is the pre foreclosure stage. This is a legal action that has been taken by the lender in the event of non-payment of the mortgage loan by the homeowner. However, this opens up a window of an opportunity for those that are looking forward for a chance to invest in such properties.

At this point the investor can purchase the property from the homeowner and avoid a situation of the foreclosure. The lender is also happy to let go of the property as they dont need to sell it or even foreclose the property. Foreclosing the property or selling it at the foreclosure auctions means added expenditure for the lender as there are costs that must be borne by them only. At this point the homeowner wont bear any share in the costs relating to foreclosure of the property.

Furthermore, if the homeowner sells off the property before they are foreclosed, then they can save their credit. A foreclosure is extremely damaging for the homeowner as it will lower their credit score and make it nearly impossible for them to get further loans, whether they are personal loan, auto loans or mortgage loans.

The investors should have a strategy whereby they can get access to the properties that are lying in default. Fir this they should be able to locate the mortgage loans that are in default. This information can be gathered from the properties that are listed under Lis Pendens. Once this is done, they need to look at the various choices that they have and then get a selection of the narrowed choices that they have made. Once done, they should then contact the homeowner and get ready to inspect the property and the related documents of the property.

They will need to talk to the homeowner to gauge the needs of the homeowner. Based on their research and the homework that they have done, they would now need to calculate the purchasing price and the amount of profits that they would make. Finally the price would need to be negotiated with the lender. The buyer would also need to ensure that all liens and outstanding payments should be removed before the transfer of the property has been made. Finally the deal needs to be closed and the necessary repairs to the property need to be made to make it saleable in the market.

Making the call to the homeowner is very crucial during the pre-foreclosure stage. At this point the homeowner is being constantly bombarded with letters and phone calls from collection agency. Therefore writing to them stating that the investor is willing to purchase the home is a first start and should be a welcome proposition of the homeowner as well.

by: Mandy

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