Pre-foreclosure occurs when a house owner is no longer able to service the bank's monthly mortgage payments which they agreed to when applying for the home loan. If pre-foreclosure isn't resolved timely, the bank will foreclose on the property as a way to collect on their outstanding debt. For the bank, a foreclosure house is a liability, not an asset. Foreclosed properties make their way into bank auctions where the properties are sold off to the highest bidder.
Many people are very optimistic when it comes to keeping up with mortgage payments on their house. After all, it is the shelter for their family and considered safe. When a financial crisis hits, many will borrow against credit lines and hope for the financial binds they are in to pass. Because they are in a financially tight situation, they tend to let payments for bills such as electricity, water, and telephone go first. They may even pawn their remaining valuables to have cash on hand for meals and drinks. Thus, these homeowners suffer in silence because they can't speak to anyone fearing the shame of foreclosure. They either face impending power and water shutoff or already live in darkness without water and telephone on many nights for weeks.
Once optimistic, these homeowners now begin to feel that hope is fading away and wait for the inevitable to happen - for the banks to foreclose on the property and sell off the house. Some move to apartments before being kicked out of the house.
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As a real estate investors, we've seen many of these foreclosure houses and most aren't in a pretty shape. Many home buyers will not touch such properties and this leaves it to a real estate investor who knows how to fix up the property for sale again.
Here are some tips for property owners facing possible foreclosure:
Don't depend on your real estate agent alone - This could be a huge mistake. Now, we're not necessarily recommending that you don't use an agent to help you sell your house. While it is true that realtors are certified real estate professionals, there have been some agents who have reportedly not actively marketed a property because they let the Multiple Listing Service (MLS) do all the heavy lifting of selling the house for them. At such a sensitive stage as reaching impending pre-foreclosure, you can hardly leave the fate of your family and your financial future in the hands of one person, especially a stranger. Leave several other options available to yourself including selling it on your own and contacting real estate investors.
Sell your house before entering pre-foreclosure - Potential home buyers will be looking to buy a house which is in reasonable move-in condition and will want to negotiate the buying price. If the prospective home buyer finds out that the owner is having financial difficulty while they are considering the property, they could use this for leverage and push for more concessions or a lower price hurting your chance to get out of a tough situation with little cash left from the sold property.
Work with a real estate investor to develop a win-win solution - Good real estate investors understand numbers and many have legal and creative options for real estate transactions. You should expect them to make a profit from the transaction, therefore, don't hate them for it. Be realistic, it is business and if they didn't make any money from it, there would not be a reason for them to be there. Every pending foreclosure situation is different. Using creative investing strategies, the investors can work out a solution catered to your specific financial situation. If the numbers work for them, they'll provide an offer to you. Be sure to ask questions if you don't understand anything. It is still your house and you have every right to feel comfortable before moving forward. If it makes sense to you and helps you get out of the situation you are in and leaves you with a sizable amount of cash to start a new life elsewhere, we recommend that you take it. Sure, there could be a better deal out there but realize that if you wait too long, your circumstances and the offer might change with time.
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