An alert and successful real estate investor keeps track of foreclosure properties. He can mail the seller to inform him of his services, phone him, or meet the seller personally to make the deal. Foreclosure of properties results from non-payment of mortgage due on the property to the lender. This results in forfeiting of the property and reverting it back to the lender. Banks do not want to own the real estate; they just don¡¯t want to have bad loans on their books. This knowledge gives the real estate investor the power to negotiate with lenders or banks and find a creative solution to help the seller solve his problem. A clever real estate investor communicates with the lender to negotiate terms in the lender's best interest and have the delinquent mortgage come current. Also, he negotiates with the seller for an introduction to the lender for helping to solve the unpaid loan dues. This way, he takes a three-way call with the lender and the seller to get the best deal for all involved parties. The seller avoids lowering of credit credibility and foreclosure, the lender gets back his capital, and the real estate investor walks away with the profitable deal. 

Negotiating A Real Estate Foreclosure

1. Find the exact status and the specific details of the loan. Negotiate the payment plan with the lender on the spot. This repayment plan is known as forbearance agreement. It is a formal repayment plan inclusive of special forbearance to allow you to repay delinquent installments and/or payment advances to bring the mortgage current. It is important not to let the lender know that you are buying the property without paying off or assuming the loan. Pretend to be a friend of the seller who is helping him out of his loan default predicament.

2. Find the state laws governing your state. The worry of the homeowner is not over with the foreclosure sale. In many states, if the lender does not get all his money out of the foreclosure sale, he can get a ¡°deficiency judgment¡± from the court against the homeowner. This means the borrower (homeowner) owes the lender money that the lender lost from the whole process. This can lead to legal problems for the borrower and loss in credit ratings for the future. Keep this in mind before investing in real estate foreclosure properties.
3. Preforeclosure sales. This is the best way to avoid a deficiency judgment from the court. This is a short sale; the proceeds of the sale are accepted as full satisfaction for the mortgage obligation, even if it is less than the mortgage balance. 

4. Lender¡¯s profit in foreclosure sale. The lender is not allowed to make a direct profit on a foreclosure sale. Any excess amount made as profit is passed on to the borrower. A lender normally makes a neat profit, indirectly in the form of a late fee penalty, accrued interest, attorney fees, court costs, filing fees, and title work fees. This way, even the lender is not at a loss on bad loans in real estate foreclosure deals.

What Triggers A Foreclosure 

Default on loan re-payment is the biggest cause of real estate foreclosure. Sometimes a variety of factors by the homeowners, too, can trigger the foreclosure process:

• Homeowner fails to pay the property taxes, which creates a lien that jeopardizes the lender's security.
• Homeowner fails to pay homeowner association fee.
• Homeowner transfers title without getting the lender's permission.
• Homeowner diminishes the value of the property by indulging in illegal actions such as storing harmful chemicals or damaging property.

A lender can ask for foreclosure because of these factors. However, a bank as lender uses the non-payment of mortgage to foreclose the property.

Making Profits On Real Estate Foreclosure

Make an effort to keep yourself abreast of the properties facing foreclosure, and make direct contact with the homeowner to get the correct status. Look out for the properties that have the following features:

• A lot of equity in the house.
• The property located in a good area, or located in your area of interest.
• A lease/purchase agreement can get you a good deal. You could make a one-time down payment to cover delinquent balance and have the new lease payments cover monthly mortgage payments. 
• If there is a large equity in the house, then stop foreclosure by paying back the delinquent loan, fix up the house to make it more attractive, then resell it. You can offer a portion of the profit back to the seller to make it even more of a win-win deal. 

It is always worth visiting a property on the verge of foreclosure. Many times, a homeowner may be looking for a helping hand to help him out of his misery. An unfortunate financial situation can catch many decent people unaware and make them default on their mortgage.

 

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