Pitfalls in Distressed Real Estate Sales Opportunities

A foreclosure, we understand, is the process by which a lender in default takes legal possession of an asset from a borrower. This is easy enough to understand, but the mechanism for obtaining a foreclosure judgment against a default borrower is complicated, involving long paperwork, sometimes aggressive and despondent, many absurdly offensive to the borrower, most of the time carried out by insensitive lawyers who do not necessarily care about the default party’s state of mind, who in most cases are in good standing. -Get More Info
At this point, he decides to default on his loan payments, pushed by market forces. Is he to blame? Is he at fault? Because he needs income that he does not have, he can not change his loan. Now he will be incessantly harassed, called upon tens of times a day, collectors will threaten and attorneys will sue because of his inability to serve a debt that he can either not repay or will not repay because it is nonsensical for him to do so, regardless of an immaculate past credit history.
So what is to be done by a distressed borrower?
As the lender advances the default process, a Broker’s Price Opinion (BPO) is eventually requested to assess the market value of the property via a third party broker. The lender will advise on the basis of that value of the minimum net price for which their investor usually FHA) will sell the property. Without taking into account other outstanding costs, such as property taxes, maintenance fees or assessments, which are also very likely to be in arrears.
An investor or new owner purchasing a foreclosed asset must clearly understand the frame of mind of the owner of the distressed property, and also that it is not sufficient to make an offer for a property, usually a low bid; for example, on an attractively priced REO (owned property of a real estate bank), but also to realize that others may also bid to trigger the typical lender request for the highest and highest Therefore the new buyer can not be certain that he will close on the foreclosure he offered a price for or the short sale he just signed a contract early that morning, because in addition, in a short sale, the lender will reserve the right to continue to receive offers that may be more attractive even when a contract with Proof of Funds and Escrow deposit is in place.