A Look At The Existing Foreclosure Market

by Bob Walton on March 3, 2012

Foreclosures are always available, regardless of the economic times, because unexpected things happen to people, and they simply can’t continue to pay their mortgage. It does not automatically mean that they should be ashamed, it simply means that circumstances developed which could not be controlled. Records from the Mortgage Bankers Association show that every three months, approximately 250,000 new families enter into foreclosure. Let’s take a look at some information about properties that fall under the heading of foreclosure.

A Bank Owned is owned by the lending company who foreclosed on the loan, and efforts to sell it at public auction have failed. In most cases, the opening bid is established by the amount of the payoff of the loan and some other factors, but if no one makes an offer on that amount, the property is removed from the auction block and becomes an REO.

Once a property becomes Bank Own, they are turned over to an asset management group to market and sell. Usually an NRBA (National REO Brokers Association) Real Estate Broker is selected to list the property, but some lenders believe they get better results selling the properties from their internal departments. Banks are not in the business of managing rental properties, so they sell them to clear their inventory.

When a bank has a property that has been on its books for a long period of time, they will sometimes offer it for sale as a below market opportunity. After so much time, lending institutions need to get properties off their records, and free up some revenue. These might be properties which have sat empty and fallen into bad repair, or begun to deteriorate from the elements.

HUD/VA properties are not owned by the government, nor did the government put up the money to purchase the properties. These agencies only guaranteed the loan, in the event the borrower failed to be able to continue making payments. Once that happens, the government ends up with possession of the real estate, and they are listed on their site as foreclosures.

A pre-foreclosure could be a good time to create a win-win situation for everyone involved. This is the point at which both lender and homeowner can agree to some terms, and the family does not have to vacate the property. It also means the property won’t sit empty, and end up becoming a below market sale. There have been cases where the previous owner is able to recover and then return to making the payments.

Short Sales are simply pre-foreclosures which are under the same type of agreements, and the occupants are allowed to continue using it as a residence. In some cases, a government agency known as HAFA can become involved, and provide some financial incentives, which could help resolve the situation for the lender and the homeowner.

Foreclosures are something which simply happens in life, and are not always an intended outcome. Rules and regulations apply to the proper handling, of these circumstances, by all parties concerned. Whether it is the buyer, lender or person whose property is foreclosed on, these properties are eventually for sale.

Learn more about how to find foreclosures for successful investing, and for taking advantage of below market opportunities. We also provide insights on how to buy foreclosures while avoiding costly mistakes.

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