Value Of Pre-Foreclosure Sale

How Does a Person End up in Foreclosure?

When someone purchases a home, the usual process involves a relatively small portion of the price of the house as a down-payment and the balance of monies owed on the house is obtained through a loan from a bank or mortgage broker. The loan is secured by a mortgage or deed of trust against the property for which it is borrowed. If the borrower does not maintain payments to the lender for the property, the lender can file foreclosure in order to recover the debt owed them. By foreclosing on any liens or encumbrances against the property, the lender then becomes the legal owner of the property and can, in turn, resell it to recover the amount of the original loan plus any costs incurred through the foreclosure process.

A pre-foreclosure sale is when a property is acquired before it goes to public auction. If you are looking to purchase such a property, time is of the essence. It is far better to contact the homeowner in pre-foreclosure in order to get a deal set up that is beneficial all the way around.

Taking Advantage Or Creating Advantage?

As with most things, there are often two schools of thought. Foreclosures are no different. Many people believe that by buying a property in foreclosure you are taking advantage of another person's misfortune. However, by taking a good look at the situation, you may find the opposite is true. When the homeowner sought money to make the purchase, the lender made the money available in good faith, and the borrower agreed to repay the loan. By defaulting on the payments, the borrower has broken the contract with the lender and the lender, in order to protect their financial interests, may foreclose on the property. This action is stated and agreed to by all parties when the mortgage is drawn. When the agreement is broken, someone stepping in at the pre-foreclosure stage is doing everyone a favor and may solve the problem for the homeowner who created the problem.

How An Investor Can Help

Pretending the problem doesn't exist is of no service or value. If the homeowner in foreclosure does nothing, the foreclosure is ensured. The person will lose the house, severely damage their credit rating, and ultimately lose all equity in the property. If you want to help a person in such a situation, there are some things you, as an investor, can explain to the homeowner in terms of avoiding a foreclosure and selling in the pre-foreclosure stage.

It's All About Credit Ratings

First, and likely most important in terms of future living conditions, it is imperative to protect their credit profile. In today's credit-conscious society, credit ratings affect everything from buying insurance to purchasing a new car. A person in foreclosure has a multitude of financial challenges before them and an investor can be a godsend when it comes to possibly stopping the foreclosure and assisting in reestablishing a credit profile or preventing credit ratings from plummeting.

It is also possible to recover some of the equity when a homeowner in foreclosure works with an investor. Once the foreclosure is complete, all equity in the home is lost, so it makes sense to have someone who can help recapture or protect some of the equity if possible.

Saving Sanity And Much More

Finally, the stress of foreclosure can cause serious strain and problems in a person's life. Depression, divorce or separation, faulty decision making resulting from being in a stressful situation, and any number of other negative situations can arise. By stopping the process, the person's life can be spared a lot of difficulty and they can move forward without the weight of a foreclosure on their shoulders.