 | The Real Estate Market and Foreclosures |
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What should you know before purchasing a foreclosed property to use as a rental?
If you are considering purchasing a foreclosed property as an ivesment to rent to tenants, you must read this article. There are so many crucial factors that need careful consideration in order for the owner to actually turn a profit on a foreclosed property. There is no denying how bad the real estate market is right now, anyone who has tried to sell a property or pay a mortgage could tell you that. Interest rates are higher than ever, and so are foreclosures.
When people think of foreclosures they usually assume the property is in a bad neighborhood, but that is untrue. Foreclosures are everywhere, from low to high end properties. This is why investors are jumping on the opportunity to buy these properties below market value, but be warned, some of these properties are made to seem like a better deal than they actually are. If you are considering purchasing a foreclosed property, have it inspected by an experienced home inspector.
What exactly is a foreclosure?
A foreclosure is a property that has been repossessed by a bank or lender because the borrower or owner of the property defaulted on the loan payments. In order for the lender to recover the defaulted amount, the home is repossessed and resold on the open market, often times in what is referred to as a short sale.
What factors have added the skyrocketing foreclosure rates?
Many home owners who could only get approved for a mortgage loan through the most recent "creative financing tactics" put forth by unethical lenders have found themselves trapped in an adjustable rate mortgage loan. With interest rates higher than ever, unsuspecting home owners have found themselves in a bad situation stuck with adjustable rate mortgage payments that are out of control, with that, so are the foreclosure rates.
The entire United States is experiencing high foreclosure rates. States such as California, Colorado, Ohio, Georgia, Arizona, Illinois and Indiana all posted foreclosure rates among the nation's top ten in 2007, and documented more than 1 percent of their households entering some stage of foreclosure during the year.
There are a few types of foreclosures. For example, a judicial foreclosure is a foreclosure in which a lender can bring a suit for foreclosure against the defaulting borrower for the delinquency and force a sale. This foreclosure method is used in several states with the mortgage system or in deed of trust states. It appears that the amount due is greater than the equity value of the real property and the lender wishes to get a deficiency judgment for the amount still due after sale. In many cases, a property is not worth what is owed on it. Many borrowers get in over their heads financially and become what is termed as upside down. This is not necessary in those states which give deficiency judgments without filing a lawsuit when the foreclosure is upon the mortgage or deed of trust.
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