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Home Foreclosure ? The Present Crises In Usa

Foreclosures are of three types; residential foreclosure, commercial foreclosure and tax foreclosures. The present crisis in USA is home foreclosures. Now what is a foreclosure? When a person borrows money from a lender, by mortgaging his property, he has to pay the lender, the interest along with the principal amount, on time, as mentioned in the mortgage contract. When he defaults payments, the lender then takes possession of the house of the owner. This process is known as foreclosure. The lender then sells the property to get back his dues.

Foreclosed homes are creating a crisis in America. Because of the recession period which America is now experiencing, (if it lasts till April, it will be the longest recession in post war period), many people are unable to repay back the loans and foreclosed homes are on the increase. The state that is hit by increasing foreclosures is Arizona. Previously there used to be a lot of buyers for foreclosed homes. Because it is a distress sale, people who dream of purchasing a good house at a cheap rate, go for such foreclosed loans. But now real estate is stumbling down, so the value of these houses are so much reduced, that it becomes less than the loan amount. So the buyers have no other go than let the owners have the house.

In fact it is the lenders that will be in a fix with foreclosed homes. In today’s situation the lender finds it very difficult to sell the house, as there are many foreclosed homes available for the buyers to choose from. Not only that, since the market value has come down drastically, they are finding it difficult to get a good price for the house, and sometimes the prices are less than the amount due to them.

Another problem with foreclosed homes is the increase of crimes in such vacant houses. This is becoming an increasing headache for the Government. As a result of this, the lenders are now asked to pay a penalty if the don’t maintain the house and leave it ignored. Also there is no flow of revenue for the government.

Home foreclosure has increased by 87 percent in 2008 and nearly 2.3 million house owners had their houses foreclosed in this year. And reports say that nearly six million homes in America are on the edge of foreclosure. Studies have also proved that foreclosed house reduces the prices of neighboring houses too.

Because of the present crises, President Obama plans to stem home foreclosures. He has announced that he will spend $50 billion to prevent foreclosures in America. A lot of Government mortgage companies and major banks are also stopping foreclosures.

Unemployment, high mortgage interest rates and reckless spending are some of the reasons why many house owners are loosing their homes to foreclosure. What is needed is save and spend money carefully. Always make sure that you have set aside sufficient saving to pay for the mortgage. Act wisely and avoid home foreclosures.

Sam Kinison is the chief writer of Foreclosures Connections. For more queries about home foreclosures, foreclosure property, foreclosure connections, real estate foreclosures please visit


Tips How to Become Loan Officer With Short Sale Training

Doing a mortgage loan officer training course may end up adding some extra value to your curriculum vitae and make your profile stand out while you go for interviews. Many people are unable to learn as they have to work to feed themselves and their families. For such people, these institutes offer online courses. The online courses are easily accessible by the users once they log on to the site. The portion is divided into a number of sections so as to make it easier for the user to use the exact part that he or she wants to. The user has to complete a specific part of his or her work in a specific given time schedule. Thus, the online course helps teach its users some time management.

The loan officer training course is now-a-days available in a revised pattern as the old pattern is considered inefficient by experts. The new pattern tends to impart a lot of practical knowledge than theoretical. The loan officer training course includes video clips which help the candidate understand more and make his or her mortgage related fundamentals clear. With the help of these video clips the candidates come to know about the exact steps that they should take when they are stuck in any difficult situation.

The course includes subjects like loan originating, mortgage products, mortgage appraisals and underwritings which are extremely important from the point of view of a career in the mortgage industry. The loan officer training course also helps to instill values like time management, getting and retaining customers, avoiding mistakes and taking perfect actions when stuck in situations. All these values are extremely important for a mortgage official. The courses also have timely tests and quizzes to help the students revise their studies and to avoid making the course a monotonous job to be done.

The loan officer training course is also an option for already trained loan officers to revise their knowledge and learn a few more new things. The combination of heir experience in the field and the certificate of this new course may help them increase their efficiency at work and their incomes. On the completion of this course, the candidate gets a 12 month valid license. In these 12 months the candidate may repeat his or her course or work and gain some more experience. Thus, this course and the 12 months after it, make you efficient enough to handle everything on your own and start doing the real job. The only thing to be worried about is that the mortgage industry is defined differently at different places, thus you cannot work on the same license at two different places.

Short Sale Loan Officer Training

In today’s real estate market, the once lucrative opportunity of being a loan officer or mortgage broker originating loans and refinancing homeowners is no longer so lucrative. The sub prime mortgage meltdown and the mortgage credit crunch has really put a damper on that traditional business model.

What you should know is the short sale mortgage business is doing fantastic right now. There are more defaulted mortgages in the marketplace right now than we have ever seen before. The transition from a residential mortgage brokers business to a short sale mortgage business is very easy. The mortgage brokers and loan officers that use my short sale mortgage system are making ten times more now per file than they used to make by only originating loans. The opportunity to make big money in real estate short sales is now.

To get a Free Short Sale Mortgage Course, Go here: Short Sales for Brokers

The author is a business building coach to The Foreclosure Industry. Real Estate Foreclosure Investing is professional business of Real Estate Foreclosure Investing. For more information visit:


Foreclosure Prevention? Better Than a Cure???

When our industry was flooded with easy money such as exotic mortgages i.e. 1% mortgage rates and the lure of lower payments and more house associated with adjustable rate mortgages has caused the ripple effects of an unseen record number of foreclosures in today’s markets.

 The most common causes of foreclosures are life events, such as:

–   Death in the family – where there is no life or mortgage insurance in place, so not only does the family loose one income, but they also now have the expense of funeral arrangement, which can be costly.

– Unexpected Medical Expenses – examples include but not limited to diabetes, cancer, pneumonia etc, where the homeowner or member of the family does not have health insurance when these medical expenses occur.

–   Divorce – one of the spouses become emotionally attached to the house and has to figure out how to make ends meet with one income and are willing to make the sacrifice even if it means living pay check to pay check, instead of selling and starting over.

–   Job Loss – caused by downsizing, lay offs or being terminated, has the greatest impact on 1 income families that have limited savings and or insurance.

 Foreclosure in itself has numerous negative impacts not only financially but emotionally which can lead to depression, divorce and tear families apart.  The number 1 cause of divorce stems from financial issues, which include foreclosure.  Its not uncommon for someone that went through foreclosure to also go through a divorce, have damaged credit because of the foreclosure, and to make matters worse they cant even rent an apartments as they are being denied because of the foreclosure, which makes it real hard to start over.


Here are some tips to prevent Foreclosure……

Make your mortgage payments within the 1st 30 days of each month – if you make your loan or mortgage during the first 30 days, the bank will have no reason to start foreclosure proceedings.   Even though after the 15th of the month it’s considered a late payment, this will not report late on your credit if it is made by the 30th of the month.  Foreclosure Proceeds usually start after the 3rd or 4th consecutive month of being late.  Pay your Mortgage first – When it comes to prioritizing pay for the roof over your head first, instead a lot of home owners make the mistake of paying for their credit cards or utilities first.  Protect your credit – In our credit driven society it is important to understand that when it comes to big purchases like buying a home, your credit rating is the most valuable thing you own. Try to minimize borrowing and make prompt payments on all your bills. Avoid debt – before becoming a home owner try and eliminate as much debt as possible and try and save a 10-20% down payment. Try to live within your means and only use credit if you are sure that you can meet the repayments. Communicate with your lender – Open communication is paramount with your lender.  Make payments on time and reply promptly to letters and phone calls. Lenders are more likely to be flexible with people who demonstrate a mature and responsible attitude to loans.  Remember lenders are not in the business of Foreclosing, they are in the loan business, and they rather collect interest payment than repossess a house. Start an emergency fund – set aside some money every week for an emergency fund each case is different but a $2000-$5000 fund is recommended and only dip into it if there is a real emergency.  Emergencies include but not limited to job loss, car repairs etc. Establish a home equity line of credit – when you purchase your home, arrange a home equity line of credit for use in an emergency. Consider job-loss or mortgage life insurance – for an additional monthly premium, you can obtain cover that guarantees your mortgage payments if you lose your job or pass away unexpectedly. Know your rights – read up on the rules and regulations governing credit and foreclosure. If you know your rights, you stand a much better chance of keeping your home if you do go into arrears. Beware of scams – If you are foreclosure you will become prey to investors or want-to-be investors out there waiting to make money from foreclosures and not all are legitimate. Be wary of buyers who offer to buy out your mortgage or private counseling firms who charge for things that you can do for free yourself. Brush up on bankruptcy law – Majority of homeowners who find themselves in foreclosure file bankruptcy to save their homes, although bankruptcy is a good option for some, it is not for all, just like foreclosure, bankruptcy should be avoided at all cost. 

Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in mortgage loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Loss Mitigation and Commercial Mortgages. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit or Call 954-678-5796


Dealing with Foreclosure

With the economy in state that it is currently in, many people are dealing with the threat of foreclosure. From personal experience I can tell you that nothing is more gut-wrenching and nausea inducing then the possibility of losing your home. Their is is no magic bullet solution to avoiding foreclosure; just your rights within the law, and the actions that you take as a homeowner to deal with, and prevent the process.

Step 1: Communicate.

The bank does not want your house; they want your money. A house might be a valuable asset, but to bank, it is a lose of liquidity and a hassle. This means that if you communicate with your lender as soon as you realize you might not be able to make a payment, they will be willing to work something out with you. Though they are perfectly willing to begin the process and take your home, banks would rather work out some sort of plan that will you in your home, and your cash in their pocket.

Step 2: Educate Yourself.

Though many foreclosure laws are universal on a national level, each state has specific laws governing the exact procedures surrounding the process. The only way in which you are helpless is if you do nothing. Contact local government counselors who will offer free, effective strategies for dealing with foreclosure. They will also inform you of your legally mandated rights, and what the bank can and cannot do to you during the foreclosure process.

Step 3: Be Proactive.

Stop feeling sorry for yourself and do something about your situation. Help is available to you if you are willing to step up and seize the situation. Yes, the situation is frightening and rustrating. Yes, you feel helpless, but that is a state of mind that you chose. The government will help you; your bank will work with you, but you have to educate yourself and become active. You are your greatest ally.

If you have questions about the foreclosure process look here for additional specific information.
help here.


Looking for Genuine Miami REO Properties

One of the biggest cities in the state of Florida is Miami. It is a sprawling metropolis of home deals. Indeed, it is a perfect city for residential homes as well as recreational areas along with the whole city being bordered by the Everglades River, Biscayne Bay and last but not the least, the Atlantic Ocean. There are numerous Miami REO properties that can be found right here and ready to be flipped for a profit. So ask yourself, are you ready to invest in foreclosure properties in Miami?

Yes, there are loads of Miami REO properties in Florida these days and they are gradually becoming popular. For anyone interested in foreclosure Miami Properties, there are scores of choices to opt for. There are lavish condominiums, apartments, attics, buildings lofts, mansions and the like. Aside from that you can also select from commercial properties which include restaurants and hotels and warehouses.

When it comes to Miami REO properties, the choices are certainly good. The only thing you need to do is to conduct some modest research. You can find free lists of foreclosed homes at, or You will be able to discover some foreclosure properties Miami you can choose from. Just make sure that your chosen foreclosed property is fits your budget. There are various types of Miami REO properties which are available within the city. Who would not like to steal a property in downtown Miami, the much loved Miami Beach along with Coconut Grove, Coral Groves, Surfside, Bal Harbor, Brickell, Aventura, Lincoln Road, Key Biscayne, Fisher Island and other hot spots?

The artistic richness of Miami likewise contributes to the investment value of Miami REO properties. Without a doubt, the city welcomes numerous tourists annually with a bigger number of celebrities calling Miami their home. This is because REO properties in Miami are known to be a firm investment choice by not just surviving the falling real estate market in the United States but by rebounding and making a comeback  sustained by the tourism industry. You may be tempted to purchase an REO property in Miami since it is a breathtaking destination for your family’s holiday vacation or your home after your retire from work.

Miami is thought to be the best city for leisure activities and is now becoming the home for numerous retirees. Many of the REO properties in Miami are great investments due to their geographical settings. For instance, the city of Miami is surrounded by the Everglades River, Atlantic Ocean and the Biscayne Bay. When you see the inherent value of the properties it becomes financially prudent to invest in foreclosure properties which are being auctioned for pennies on the dollar.

Miami REO Properties can be a really good deal. Foreclosure Properties Miami are our business. We help you save time and money by finding the best home for you in the desired area.


How to Assemble a Successful Short Sale Package

A successful short sale package begins with calling the lender who owns the loan or mortgage. Stipulations and requirements for these types of sales vary from bank to bank. The only way to know what is required of you is to make a phone call to the lending institution. Make sure you talk to the supervisor who is responsible for the final decision in the application process, not the “delinquent payment” department. It may take a few phone calls, but by talking to the person in charge you will be better informed about the entire sale process.

A letter of authorization is usually required to begin the process. The letter stipulates that the lender can talk directly with your real estate or closing agent, lawyer, or title company without you being present. This letter should include the address of the property, reference to the loan number, your name, current date, and your agent’s and/or lawyer’s name and contact information. While this letter is not required by law, it will simplify the process for the lending institution, thus making it more likely that they will approve the sale.

A typical short sale package includes a preliminary net sheet, a letter of hardship, proof of current income and assets, copies of the last three months of bank statements, a CMA (comparative market analysis), and, once the sale is finalized, a copy of the purchase agreement. A preliminary net sheet lists the expected sale price of the property minus the closing costs, realtor fees, unpaid loan balances, outstanding payments due, including late fees, and any accrued taxes that may be owed on the property. A realtor can usually prepare this sheet for you.

A letter of hardship is a letter that describes why you have fallen behind on your payments and why the sale of the property will be less than the amount owed on the mortgage or loan. This letter should by as truthful and heartfelt as possible, and should be written by you. In it explain why you have fallen behind on your payments. This could include unexpected medical expenses, a death of a wage earner, or a lost job due to layoffs or cutbacks. Most financial institutions look down on excuses that relate to being fired from a job, unexpected legal fees due to lawsuits, or divorce settlements. Remember that banks do not like to receive partial payment on an outstanding loan. You have to convince them that you need the help.

Proof of income and assets is a declaration of your current financial status. This should current income levels, backed up by back paycheck stubs and bank statements, any other properties or assets of value that you may own, any stocks or bonds you may own, or any number of other things that a bank may classify as collateral. Banks vary greatly on what they require to be included. Therefore, you will need to contact the lending institution to find out the details. Remember you want to be as honest and accurate as possible. Finally, a comparative market analysis will help prove that you cannot sell the property for the value of the loan. This analysis includes recent property values and impending market sales, and can be prepared by your realtor. Collect these documents and letters to create a successful short sale package.

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Finding San Diego Foreclosures

Finding San Diego foreclosures is fairly easy in the depressed market today. You can also find San Diego foreclosures in strong markets, and the only difference between the two markets is that you will find more San Diego foreclosures in falling markets.

Many homes that end up as foreclosure properties eventually become deeded to the bank. There are many people who dont want to buy short sales homes and San Diego foreclosures for many reasons. Some of those reasons why purchasers may refuse to buy a short sale home could be any of the following: the seller perhaps could not qualify for a short sale, the listing may be overpriced for the amount that was mortgaged, and the bank might refuse to accept less than the present mortgage balance. Also, sellers may have taken all of the foreclosed homes assets or damaged the property, and buyers may have passed up the short sale option in favor of having a hassle free purchase instead.

Not all San Diego foreclosures are great deals or great bargains, and there are those that have the potential to turn into real nightmares. There are, however, San Diego foreclosures that are perfect gems just waiting for someone to take a chance on them.

First time San Diego foreclosures buyers might want to hire a real estate agent for guidance and assistance.

There are agents that specialize in San Diego foreclosures, and can search the MLS for you and be able to bring up all of the foreclosures. Buyers and non agents dont have the same access to the MLS like agents do. You can ask your agent to search for San Diego foreclosures, and when you recognize a listing agents name over and over, pull up that agents profile and look at their listings. There are probably a ton of foreclosures with that agent.

Driving through neighborhoods is another good way to find San Diego foreclosures. The houses will have signs up that will post the homes as Foreclosures, Bank owned, and Bank repossessed. Call the agent whose name is on the sign and ask about other foreclosure listings that may be coming on the market. Agents who specialize in foreclosures sometimes wait weeks while bank management approves the list price, so you can get a jump on other buyers by asking about new foreclosures not yet listed.

Many banks maintain online lists of foreclosed properties. Some of the banks that maintain a list of San Diego foreclosures are Countrywide, Bank of America, Chase Mortgage, and U.S. Bank. Some lenders hire asset management companies to handle foreclosures, like Wels Fargo and Keystone Asset Management. There are also government agencies that can help, like HUD, Fannie Mae, Department of the Treasury, and the SBA (Small Business Association).

Many people also go to auction houses to bid on San Diego foreclosures as well.

To know more about San Diego foreclosures please visit our website.


Tips To Help Stop Foreclosure

The consequences of foreclosure can be far reaching.  While foreclosure laws vary from state to state, general strategies exist that apply in most situations.  It should be kept in mind that stopping foreclosure does not always imply keeping the house.  Stopping a foreclosure may only benefit the home owner by being able to keep a foreclosure off of their financial record.  Keeping something like this out of the financial history can be beneficial as the home owner tries to get back on their feet.  They will be more likely to be approved for a new home loan or allowed a faster approval for a new apartment.

One way to stop a foreclosure is to pay off the defaulted loan amount during the pre-foreclosure grace period.  This grace period is the last chance the home owner has to stop the foreclosure process before being forced to leave the residence.  Each state has their own rules as to how long the grace period must be.  The law requires that a grace period be given before an attempt to take the house back is made by the lender.  This allows the home owner a chance to rectify the situation before the lender takes more drastic actions.   

The homeowner can avoid a foreclosure in their financial history if they can sell their property to another person and make enough money from the sale to cover the balance of the mortgage.  Since the new buyer will pay off the original lender, the former home owner’s record will not reflect that they lost their home because of foreclosure, it will just show up as a normal sale in their past.  A person can buy the property from the owner or from the lender in a public auction after the grace period.  If the home owner can find a buyer willing to pay more than the remaining amount of the loan, the home owner may even be able to walk away with some cash in hand for the deal. 

If the lender is willing to accept less money than what is left of the loan, they may approve the owner to complete a short sale.  If the home owner can find a buyer for the property for an amount lower than what remains on the loan, the lender will have the option of approving the sale and forgiving the difference, approving the short sale and demanding the difference of the loan, or refusing to approve the sale and allowing the house to fall into full foreclosure status, public auction and all. 

It may seem like the above listed information is “not good enough”, but quite frankly, few options exist for keeping a home after a foreclosure has already been initiated.  This does not mean that a person has to have the rug torn completely out from under them, it just means that a person shouldn’t expect miracles.  While it may take some time and a willingness to adapt to the new change, recovering from a foreclosure is possible.  Recovery is also possible if a person avoids a foreclosure but is still required to leave the residence.

Fighting a foreclosure alone can be a stressful event in a person’s life.  Hiring a lawyer specially trained to deal with banks and lenders may stall the process considerably in favor of the home owner.  Even a few extra days to fight the process can help the home owner prepare for life after losing their home.  The home owner should never forget that they have rights during the foreclosure process as well, and a lawyer can make sure that those rights remain in tact. 

Timothy G.McFarlin is an Attorney at McFarlin & Geurts with expertise in a variety of practice areas including real estate law, debt reorganization, bankruptcy, business litigation, and consumer law and mortgage litigation.? Clients range from individual consumers to large national corporations.


How Can First Time Home Buyers Take Advantage Of Foreclosures

It is quite clear that foreclosure trends are on the rise, almost across the board in different parts of the country (USA) and this is no laughing matter but as the saying goes, one persons loss is another’s gain which is why the current housing market represents a big opportunity for those first time homebuyers who want to get a once-in-a-lifetime deal on a great house which is projected to appreciate as the economy stabilizes.  Those who might have been new home buyers a few years ago are now looking at foreclosure listings because it is a fact that these properties are priced to sell and have a huge potential in terms of appreciation both in short and long term.  Lets take a look at some  of the facts and ways first time home buyers can take advantage of foreclosures:

FACT – It is a buyers Market!

The market conditions we experienced a few years ago have clearly shifted and what was a sellers market has become a buyers market, this means that a few years ago people were selling homes because of highly inflated values but as the market reaches an equilibrium point buyers have the upper hand in terms of negotiation; this is because banks and other financial institutions want to get these properties out of their books since they are not in the business of owning properties but in the “finance” business.

Benefit – High Supply of Foreclosed Properties to Choose From

There has never been a market that offers such benefits to buyers as the housing market offers to first time property buyers right now.  In every part of the country homes are going into foreclosure which is a market condition which widens the horizons of those who want to own their own house of are looking to buy investment properties and yet another added benefits is that since there was a big housing bubble which triggered constructions and developments to spike, foreclosed homes and properties are virtually brand new!

Benefit – All-time Low Interest Rates!
In efforts to stimulate the economy the federal government has cut interest rates to an all-time low, this means first time home buyers not only get a high number of choices but the rates on loans which are meant to finance these properties have dropped dramatically.  The fact is that it still costs money to finance a home but it is not nearly as much as it did 2-3 years ago.

Benefit – High number of Incentive Programs

Savvy first time home buyers who want to take advantage of current market conditions can increase their benefits by taking some time to research the incentive programs that are being offered at the state and federal level in order to boost the economy and stabilize the housing market.  These programs are tailored and targeted towards first time homebuyers which means that taking some time to do your homework could pay-off, big!

Despite of the fact that it is a buyers market, there are still some factors to keep an eye on, if you are a first time home buyer who is interested in purchasing a foreclosed home, one of them is that these homes may have been empty and unattended for quite some time which is why it is important to have the property fully inspected before signing any document but as you might have figured this is just basic steps that every homebuyer should follow but nevertheless it is good to make notice of such situation, especially in these times when first time homebuyers are trying to get the deal of their lifetime. provides Free Foreclosure Listings and Free foreclosure search features that first time homebuyers and savvy investors can use to get awesome deals on properties near them in virtually any place throughout the US, visit us today!


Real Estate Short Sales|a Description Of The Process

It was a real estate boom like no other. Interest rates were dropping incredibly, homes were garnishing appreciation by the week, the stock market wasn’t moving and first time home buyers were getting their piece of the American dream. Mortgage brokers, Real Estate Agents and New Home builders were raking in the cash. It seemed like it would never end. Month after month, year after year the sales of new and existing homes climbed. Investors threw their money into the housing market and then as fast as it came it went thud.

The thud started around November of 2006. It started incrementally with a slower than expected August, a quiet November and the news articles started to reflect which was inevitably going to commence. In January of 2007 the Real Estate Taxes were due and crash it went. What seems to be happening now is a rush to unload. From the outside looking in you can see the stock market rise as the housing market falls. New home builders with still a glimmer of hope increase the price of new homes yet offering larger than expected home incentives. Upgrades galore, creative financing, buyers agents bonuses and yet they continue to build on the land they have allocated for future expansion. If it seems familiar, it is. It has an uncanny sense of 1983 all over again.

How did this happen and what makes this housing thud different from the last? There are some minor differences that make this more unique than the last housing crash. Back in the 80’s interest rates were at sometimes 16%. At that point it made sense to try to assume a mortgage that was a lower interest rate and throw your cash into their equity. But it wasn’t realized equity. It was an inflated sense of a market share. As prices dropped home owners found they were in an over valued situation and as the job market suffered they could no longer pull their money out of their house to move on with their lives. It caused a ripple affect of people walking away from thousands of dollars just to save what they had left. Real estate was sold at auction in a manner that you would buy livestock or sheriff’s sales and the late night infomercials were non-stop. “No Money Down” was the catch phrase. You can still find those publications that cite 20% interest rates and how finding a home with a 10% interest rate was a real steal.

So what happened in the last decade? Feeding on that premise that no money down is something of a desired situation and interest rates dropping most people would assume the best investment was their home. Out the window went the premise of paying down your note and having a secure position in your most valued asset. For some time it was just a matter of the educated investor refinancing a higher note and gaining equity in their home just by dropping their interest rate. It was a normal progression of an intelligent move. Refinancing could shorten the length of your home loan in some instances by 15 years and also lower your monthly payment. And then arose the hungry new home builder, the starving loan officer competing in a new market and the incredible increase of Real Estate Agents flooding the market.

Here’s how it worked. In most instances this was a first time home buyer. They were to purchase a house no money down. There would be two loans. The 80% back loan that was a fixed rate of sometimes as low as 5% and then the front loan. The front loan represented the 20% down that was typically the homeowner’s down payment. That 20% loan was an adjustable rate mortgage that was incrementally to increase over 5 years and then a balloon was to sit waiting at the end. The buyer confused by all this new jargon would ask, and then what? It was explained with the advent of interest rates dropping it was standard practice at that point to refinance that loan with another fixed rate loan or refinance the entire note at one fixed rate. It became such a standard practice that the next step made even less sense. Why not just incorporate your closing costs as well? And they did. Up to 6% of your closing costs could be rolled back into your loan. The buyer would ask what their monthly payment was and assumed that was an affordable note and there you have it. It was a disaster waiting to happen.

The second victim was the investor. The investor that in most instances was watching their money sit either in CD’s that showed a dropping interest rate or a stock market that refused to move. The investor would buy these new homes with incredible incentives and it was explained that the home had these upgrades to the standard built home, the home would ofcourse appreciate to where they could sell in 5 years and realize the equity of a moving home market, and then reinvest. They even came with appliances so that they could rent them immediately. Could there be a catch?

So here’s where it all plays out now. The new home buyer is in the home of their dreams. And the interest rates instead of dropping are now increasing. So incrementally their payment increases. Then to add insult to injury the home they purchased had an estimated tax base of an empty lot. So the taxes figured at closing were estimated on a fraction of the value of completed construction. Here comes the new appraisal on completed construction and your tax base increases by 150%. These new home buyers revisit that 20% loan and notice that the note is coming due. Struggling to understand the increase in their monthly mortgage payment, coming up with the added cash for their balloon, compounded with the increase in gas and consumable goods is overwhelming. So, as suggested by their loan officer they search to refinance.

What was not explained to them is with the rush of foreclosures on the market and millions of people in the same situation, you must have equity to refinance. You must show the ability to be able to support your note. And they are turned away.

The investor finds themselves in a new subdivision competing with new home sales and no equity. The builder has built in their contract that they can not erect a sign in their yard advertising the property for sale until the subdivision is completed. There are not to hang a lock box on the door. So basically they must rely on the local MLS to market their property. To add insult to injury now the new homes are selling the exact same house they purchased 2 to 5 years earlier for less than they purchased it and adding more upgrades and incentives to new home buyers.

This created a flood of foreclosures on the market. People frustrated are electing to walk away from the home and their good credit rating. Lenders are found at the court house steps now purchasing these homes, fixing them up and reselling them. In some instances the homes are not even rehabbed but placed back on the market sold “as-is, where-is”. That would be the new catch phrase.

In order to circumvent the costs of the foreclosure the lending market created an alternative for a homeowner to stop their foreclosure. This system has now been name a “short sale” or a “pre-foreclosure”. The short sale is handled this way. The homeowner without any equity in their home approaches the mortgage company and requests a short sale. They are to fill out financial information substantiating that they are no longer able to pay the note. Upon acceptable of the package the home is then listed by a real estate agent on the local MLS and marketing as a “short-sale” or “pre-foreclosure”. The offers are then submitted directly to the lender and the lender will make the decisive move as to whether to accept the offer or renegotiate. The homeowner at this point is nothing more than a signature on the listing agreement or the closing statement.

Once the lender comes to an agreement with a prospective buyer the closing date is set and the house changes hands. In most instances the loan is reported as being satisfied and the homeowner now can relax and move to a more comfortable situation. There are floods of new seminars on purchasing property in this type of distressed situation and even though it is a reliable way to purchase property the best case scenario is ofcourse an end user. This is a particularly good way for a home buyer to purchase a property in relatively good condition for a discounted price.

As a real estate agent in the Houston area I have found it difficult to find documentation to send my sellers to to educate them in the process. Most websites are about buying real estate in a short sale situation but I have been limited in finding documentation to support how you would sell such home. Henceforth the publication of this article.

Linda Landman is a real estate agent in Richmond Texas that specializes in short sales and land acquistions and sales. You can find more information about her at

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