Historically speaking, the real estate market has its ups and downs, but it’s still possible to practice the real estate flip. No matter what period of time you decide to invest in real estate, you’ll find that there are a substantial amount of homeowners that are in foreclosure. They have come to a point in their lives when they decide (either voluntarily or involuntarily) that they can’t afford to make the payments on thier mortgage any longer. Typically, once a homeowner gets two or more payments behind on their mortgage, it’s nearly impossible for them to become current on their loan.
The process of foreclosure can vary from state to state, depending on the laws and procedures of the courts. Regardless of where the property is located, everyone does get a chance to make good on their loan before the lender actually goes through with the final steps. When a homeowner is in this stage, he is considered to be in pre-foreclosure. This is when the status of hte loan has changed from being “current” to being “late”, “behind”, or “delinquent”, and the bank starts to put pressure on the homeowner to make payments on the loan.
If you’re a deal seeker in the real estate investing world, then people that are in pre-foreclosure are a great target market. They have not lost the house to foreclosure yet, but are heading down that path. They are well aware that the payments are being made, and may be looking for a solution to the huge problem that they’re faced with. By offering these homeowners several solutions to their problem, you can create win-win situations and relieve the seller form the pressure they are experiencing from the bank.
There are several scenarios and options that you can offer a homeowner who is facing foreclosure.
* All Cash Offer - If there is enough equity in the property, you can offer to pay the seller all cash for their property. You’ll typically find these scenarios when the seller has owned the house for several years, or put down a large down payment.
* Short Sale - This is the process of negotiating with the bank to accept less than is owed on the mortgage to pay the loan off in full. In order for a bank to consider a short sale, the payments need to be at least 3 months behind. If the house is in need of repairs, then you can usually get the house pretty cheap. It does take 6 to 12 weeks (sometimes longer) to get all of the steps of the short sale completed, but can be worth the wait. If you play your cards right, you can buy houses for as little as 5 to 10 cents on the dollar.
There are other techniques that you can use when dealing with people in a pre-foreclosure status, but for now we’ll just cover those two. If either one of your offers that were mentioned above get accepted, you’ll certainly be ready to implement your real estate flip techniques and make a few thousand dollars.
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