California homeowners are defaulting in record numbers andforeclosures in California will get worse before it gets any better. Foreclosure Sale signs are now common in many communities and can be easily found in many MLS searches in California. Some counties are reporting over 250% rise in foreclosures from 2006.
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments and the lender files a public default notice.
The foreclosure process can end one of four ways:
- The borrower/owner pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure
- The borrower/owner sells the property to a third party during pre-foreclosure, allowing the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history
- A third party buys the property at a public auction at the end of the pre-foreclosure period
- The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.
This process allows for three opportunities for finding bargains on foreclosure homes.
Pre-Foreclosure (NOD, LIS):
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.
Auction (NTS, NFS):
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.
Bank-owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.
LA Real Estate Group can assist buyers, seller and investors with services including;
- Assist home owners that have received Notice Of Default (NOD), Lis Pendes (LIS) or Notice Of Sale (NOS/NFS) avoid damage to their credit by negotiating short sales with the mortgage provider, sell the home before foreclosures or take over the existing loands
ind investment opportunities for investors that are interested in short sales, foreclosures and bank owned properties - Assist home buyers who want to take advantage of the current market and foreclosures.
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Please contact us if you would like to discuss how we can help you with investing in foreclosures or if you have received a notice of default from your bank.
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