You would be better off doing a preforeclosure short sale then to waste time procrastinating only to allow the bank to foreclose and kick you out.

When you find yourself in a tight situation such as foreclosure you really do not want to admit to yourself that the bank is indeed going to take your home.

Your emotional connection will not allow you to fathom the thought of strangers coming in and telling you that you have “x” amount of days to gather all of your belongings and find somewhere else to live.

Especially since your name is on the deed and the house is of such beauty.

pic courtesy of Rhansman

Who do these people think they are?

Well, unfortunately, these people work for the bank, who is the true deed holder, and they have every right to evict you once the judge signs the documents at the court house giving them the o.k. to take possession your property.
Once this happens, there is no turning back.

Very seldom will the bank contact you after the foreclosure and ask if you can help sell the home and that is usually only in very distressed areas.

A preforeclosure short sale can save you two things:

Embarrassment – If you sell the home before foreclosure, then there will be no public notifications that your home was taken away from you. You also will not come home to a big yellow notice on your front door for all your neighbors to see, telling you that you no longer have possession and you now have to vacate the premises.

Credit – When you are only in preforeclosure status the bank is notifying the creditors that you are late on your loan. We all know that having lates on your report are rectifiable in a matter of 12 months.

However, if the bank forecloses on the property, you now have a judgment on your report which basically tells creditors that you are not a good payer and they had to go to court for a judge to give them back what you were supposed to be purchasing.

This can take as long as seven years to come off your credit.

Not a good look.

Short sale your property and walk away with your head held high. You can recover from this with dignity.

Getting into real estate can be a very daunting experience when you don’t know anything about short sales.

This is because many times when you go to the MLS or you have your real estate agent check the MLS for properties, many of them say that the price is “subject to the lenders approval” or something along those lines.

What this means is, although the property is listed at a certain price, it is up to the bank to decide if they are going to sell it for such a price.

The good thing is that the price is way less (from 50 to 80 percent) of the original price. Therefore, you can purchase a home with lots of equity in it.

However, the bad thing about short sales is that the banks take their time to give you their approval.

This can sometimes kill the deal because if you are financing through the bank, and they give you an approval for the loan, that approval has an expiration date.

If you don’t close within two days that they give you an approval, they will start to look at your file again trying to see if something is wrong.

Now although your file may be tight, this can still open a can of worms that you don’t want open.

The best thing is to keep an open relationship with your mortgage broker and let them know the closing is contingent on the property’s bank’s approval.

The purpose of sending out preforeclosure letters is to inform the owner of the home that you are aware of their pending foreclosure status and that you are interested in helping them.

When writing these letters, however, you must bear in mind that these owners are going through something personal and they are not ready to just part with something so dear to them.

You must sympathize with their situation and inform them that you understand what they are going through and that you are only there to help. Then you should tell them why it would be in their best interest to allow you to help.

Inform them that this would help to save their credit as much as possible because of course it is better to have just lates on their report instead of a foreclosure.

I would also advise that you personalize the letter with their first and last name.

Write to them as if you were talking to a friend.

Send your preforeclosure letters in regular white envelopes and hand write their name and address. This shows them that the letter is coming from a real person and not some big company.

If you follow these procedures, you should have no problem getting many responses which should lead to deals.

I enjoy pre foreclosure investing mostly because you don’t have to deal with a bidding war on a property that is being bought for less than its actual worth.

You can approach an owner that is about to lose their home and offer to purchase before it goes into foreclosure.

This should entice the owner because it’s better to have a bunch of late payments on their credit than an actual foreclosure.

It’s good for the bank because they don’t have to take possession and put this property in their inventory. They are not in the business of selling homes, therefore, they would rather negotiate a discounted profit then no profit at all.

The most tedious task in pre foreclosure investing is negotiating the price with the bank.  Depending on how desperate they are, sometimes you can get the bank to take as low as fifty percent of the original purchased price, especially in today’s market.

In a typical market, the discount is usually between seventy and eighty percent of the original loan amount.

Although it can sometimes take up to two years to get a response to your offer, there are many laws being passed that are starting to make these banks respond a lot faster.

In some cases you can get an approval as fast as thirty days. These are the lovely deals.

Yippeee…

Have you heard the great news?

Now when you give a short sale offer to the bank on a primary resident they have to give you the amount that they are willing to accept at the time the offer is presented.

This is great news because normally you find yourself in negotiations with a bank on a short sale for two to twelve months.

Years even, depending on the bank.

This is great for the owner of the property,  because they will know exactly if they need to make plans to vacate the premises on a high note or a low one.

I mean it can be a matter of exiting with a sheriff’s sale notice on the door telling them to get out within two weeks or having at least 30 days to find new habitation after selling their home at a discounted price.

If you are in the business of making money on short sales then you know that this means bigger pockets in quicker time.

No more wasting countless months and sometimes losing buyers because it took too long to get the approval and the investor moved on to another deal that didn’t take as long.

That’s right…

I am on my way to giving another short sale offer to a bank with the ease of mind knowing I will get an immediate yay or nay.

There are a lot of people out there looking to make money in real estate.  Many decide or feel like they are better served if they look for properties in a home foreclosure listing as opposed to ready to live in properties.

The main reason for this is because of the prices.  Of course the price of a foreclosure is much less than that of a home in good condition that is listed on the MLS or being sold by the owner.

This is mainly because the condition of a foreclosure is unknown and you are basically purchasing “at your own risk”. They usually need a substantial amount of work that needs to be done on it and therefore it is priced according to its condition.

I would admit that getting your investment from a home foreclosure listing is a good choice, but there is something that you need to make sure of once you are in receipt of this listing.

Are you in suspense yet?

I bet you are.

You probably think you already know.

Did you guess “price”…?

…Well that is not the answer.

Yes price is important, but we already know that the price is going to be much lower than the current market so that is already expected.

The one thing that I believe you should look for in a home foreclosure listing is the date the list was printed.

Sounds simple, but it is very important if you believe your time is valuable.

I don’t know how many times I went to or sent an investor to a property on a recently dated list and still found that the property was already sold.

You get in your car, burn some gas and ride up to a property only to see a contractor already working on it.

It pisses me off because it happens a lot more than a little. How simple is it to take a property off the list after it is sold?

Many sites don’t keep their list updated as well.

They bait you in by telling you about a property on their list that is in your neighborhood. Yes the property was listed for that price, but they fail to tell you that it is no longer available.

Watch for the date and make sure the home foreclosure listing is updated before you even bother to purchase it. If you get it for free then you didn’t lose much…

…Except your time and gas.

Yeah it has been a minute since I wrote here on my blog but that is because the real estate market has actually taken a spike in the upward position.

Investors are now buying, whether it is a preforeclosure, foreclosure or REO.

My colleagues have been calling me asking if I know of any great deals.  The funny thing is, those that buy cash have been asking and those investors that want to get rid of their properties have been contacting me for buyers.

Although I am not a licensed real estate agent, I have been lucky enough to have a load of investors, like myself, who come to me for either properties or my database of buying investors.

I, myself enjoy buying REO’s but I prefer buying preforeclosures.

My reasons are because:

1. It is much easier to negotiate with an owner of a property than it is with a bank after foreclosure.
2. The owner is in a really tight bind and because they know they will not get any profit on the deal, they can care less what you offer the bank.
3. The bank, in turn, would rather sell the property at a discount than to foreclose on it.
4. I can offer as low as the market calls for minus repairs and don’t have to worry about a bidding war.

Although these are all the positive reasons for buying a preforeclosure, there is a negative aspect to it as well.  That reason is there are some banks that take up to two years to approve your offer.

I said approve because very rarely will you get a disapproval,  especially if you know the market and possible construction cost on the property and offer in the “fair” range according to these numbers.

Despite the possibility of a long wait, I’d rather deal with the wait on a short sale approval than to put down a deposit and have my money held up for months waiting on an approval or disapproval.

That money they hold can be used for other opportunities that I may be missing out on while I wait.

When buying a preforecloure you do not have to tie up your money in any way.

The reason many investors use a private hard money lender is because they fund the project quicker and the criteria is less of a hassle then that of a bank.

When you purchase a loan with a bank, they require you to disclose proof of the following:

•    bank statements showing the down payment
•    paystubs
•    W’2s
•    Credit score of 620 and above

They also take from what used to be 30 to 45 days to look over the entire file of the applicant and give you an approval for closing.

Nowadays they take from 45 to 90 days to give you an approval for closing and that is no exaggeration.
However, a private hard money lender only requires the following:

•    A good property that can be sold for 35% more than the loan amount after repairs

That is it!

They do not run a credit check or ask for any financials. They base their approval on the project, not the person.
It is very wise that you already know the real estate game before getting any money from this type of lender because you need to know how much the house can sell for after repairs and how much repairs need to be done on the home.

This is because it would not make any sense to take money from a lender if it does not cover the repair cost.
What I mean by this is if a home is worth $100,000 after repairs and the private hard money lender is only going to give you $65,000. Then that $65,000 has to cover the price of the home as well as all repairs.

If it doesn’t, then you really have no deal.

Always make sure the loan amount can cover all costs.

Just a little note:  You should also try to include your three month mortgage payments into the borrowed amount as well.

Florida’s courts alone are facing a devastating reality of being overwhelmed with over 290,000 foreclosure filings. This is why there are many people looking to stop foreclosure in Florida.

Although this state is one of the few with lower priced homes, many still fell victim to the subprime mortgages.  When homes were owned free and clear or at a low mortgage, owners decided to refinance, with the influence from mortgage loan officers, and pull out their equity.

This, in turn, raised the price of the home and mortgage payments. These payments then became unaffordable for the owners, which then caused the domino effect.

To stop foreclosure in Florida I would advise you to find a good attorney who specializes in foreclosures. Give them all of your information. Tell them what caused your downfall such as a loss of employment or whatever caused you to fall behind in payments.

Tell them your current financial situation and what, if any, kind of payments you are able to afford now.  The lawyer should be experienced in working with banks as the banks are also overwhelmed with foreclosures and if not handled properly, they will deny your claim.

Do stay away from solicitors that offer to work out your foreclosure for a fee.  Many of these people are just out to take your money. Many of them do not even know how or where to start to stop foreclosures anywhere, let alone in Florida.

You need a hardship letter to stop foreclosure because the bank needs an explanation as to why you fell behind on your payments. They also use this information to determine if your reason is a legitimate one and if you can qualify for a loan modification.

The bank also requires that you give them all of your financial information such as recent banks statements and paystubs.  These documents inform the bank how much you are currently able to afford. They will then determine if it would be in their better interest to continue with the foreclosure and try to sell it, or to allow you to remain in the home.

When writing a hardship letter to stop foreclosure you need to include the following:

1)      What caused you to fall behind

For example did you have death in the family, lose your job or get a divorce.

2)      What your future plan is

Let them know how you intend to catch up and inform them that you can afford to pay if the payments were at least x amount of dollars lower (x being the amount you need taken off).

3)      List all necessary repairs

You may want to add a couple of things that is wrong with the home. This will sought of put the idea in their heads that the home needs repairs and therefore will not be such an easy sell. That way they would rather let you stay in it then to try to sell it themselves.

Make sure when you write your hardship letter to stop foreclosure that you make the letter as personal and sincere as possible.

Years ago it was a little harder to influence the banks to not foreclose when you got behind, but in today’s terrible economy and with these millions of foreclosures on the bank’s books, they now take any kind of explanation and usually decide in your favor.