Investing in Foreclosures E-book Foreclosure is an excited and many-faceted business. You have a lot of flexibility in how much of your time to invest in it. You will be acquiring property at a reduced rate, sometimes even at a bargain. You can either flip it (sell as soon as you renovate), live in yourself or rent it. If you are smart and cautious, you may not get rich, but you can definitely gain substantial income. Foreclosure property is often referred to as „distressed.‟ You need to investigate every property that you are interested in to find out why. There will be a story behind every property that you buy. (88) Generally, you‟ll want to seek out properties with a sizeable amount of equity. You need to be outgoing to get involved in the foreclosure business, or team up with someone who is. You or your front man will need to network with many different types of professionals, such as bankers, real estate agents and owners in desperate situations. A chameleon-like personality and empathy will serve yo u well. This course will give you an abundance of tools to support your learning curve up through your first deal. These methods are already successful, so there‟s no need to reinvent the wheel. The trail has already been blazed for you--go with proven techniques at first. Soon you may become a guru, as well! Study our methods and begin to visualize yourself as a successful investor, performing the tasks outlined here. Learn the language of real estate. Start to believe your own credibility as an investor. What happens during a foreclosure? A property owner fails to fulfill their obligation (paying the mortgage), and their legal right to that property is legally revoked. The mortgage outlines the legal terms of ownership. At this point, the borrower‟s loan is in default. The borrower is legally entitled to repossess their property if the loan terms are not met. In this transaction, the property represents collateral. The lender‟s aim is to end all rights of the mortgage holder, and sell off the real estate to recoup their costs. If this is confusing, think in terms of a car repossession. Same principle. When you buy a car, your loan and your title stay in both your name and the lender‟s. Does the car belong to you, even though you have physical ownership? No. If you miss a payment, the lender can remove your car. If you fail to make your car payments for several months, you will hear from the lender in calls and letters of increasing urgency and sternness. Your name is on the promissory note, and your car is the collateral. You are now in default. If the lender wants to get really literal about protecting their rights, they can „accelerate‟ your loan, which means that the entire amount that you borrowed becomes due. This is referred to as „calling‟ the loan. Here‟s a sample of how acceleration works. For cars, it is usually based on a 90- day cycle. At the 30 day mark, the first month‟s payment is due At the 60 day mark, the first two month‟s payments, plus one month‟s penalties are due. At the 90 day mark, the first three month‟s payments, plus two month‟s penalties are due. After 91 days, the lender can call the loan, and all of the penalties and interest plus the lender‟s costs in collecting the loan are due. Some lenders will not behave this drastically, and will help you to get caught up. However, lenders are in business to make money, so they take defaulted contracts very seriously. When you buy a house, the same rules apply. You will make two written commitments: the promissory note (which outlines your obligations) and a mortgage (which pledges your home as a “security device”). So, a mortgage and a promissory note have two different purposes. Your mortgage usually does one of two things: Names the lender as actual owner of your home, or Names the lender as lien holder (much like the car scenario). The home is yours as long as you keep up the payments. When you sign a mortgage, you are making five promises. Firstly, that you will pay off the loan. Secondly, that you will carry fire insurance so the lender‟s collateral doesn‟t go up in smoke. Thirdly, that you will not demolish any structures owned by the bank. Fourthly, if you default, the loan will be called. Fifthly, you agree that a collection agent will become involved if you default. Some states recognize deeds of trust instead of mortgages. A third party holds onto your property deed until you pay off your loan. You, the borrower are the trustor, the lender is referred to as the beneficiary and the party holding onto your title is the trustee.
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