Regardless of what some may think, banks hate foreclosing on real estate. Hate it and reluctant to do it. They would rather work out some sort of repayment plan with the borrowers by tacking onLonger Escrow Periods, Higher Rates? past due amounts to the outstanding loan or work out a loan modification. Anything to avoid a refinance. Sometimes though, it’s unavoidable.

 

Foreclosures overall here in the United States are still dropping yet they’re still very much around. Buying foreclosed homes means bidding for them at an auction or buying them directly from the bank after the lender has already taken back the property and placed them in its Real Estate Owned, or REO Department. Buying directly from the bank or outbidding others at an auction is not the only way to buy foreclosed homes. Besides, a bank’s REO department is typically managed by a real estate broker and charged with getting as much out of the property as possible.

Other real estate investors don’t wait for the home to be foreclosed upon but instead approach the owner about selling and avoiding the foreclosure altogether. Late payments to a bank harm a credit report but not as much as a foreclosure filing. Different states have different foreclosure guidelines. Some require the bank to sue the borrowers and appear before a judge while others allow banks to foreclose without going to court as long as proper guidelines were followed.

One important guideline is the issuance of a “preforeclosure” document or Notice of Default. Such documents must be provided to the borrowers along with a verification of delivery. This notice lets the borrowers know a foreclosure is imminent and to avoid foreclosure how much they must pay. Since this is a recorded document it’s available to the general public. The next filing is the actual foreclosure notice.

Borrowers who have fallen behind and desperate to get out from under their home may provide a win-win transaction for both the borrower and the real estate investor by providing a more competitive deal compared to buying a home from an REO department.