Buying pre foreclosure

[manderly6]

Originally Posted by 2bindenver

Most owners in default go through a range of emotions - especially denial.
"If I ignore it, it will go away."

A lot of the time the lender through the collections department - tell the seller they have to move out if they are not paying. No pay, no stay tactic of instilling fear. Among other strategies.

Most of the time the sellers do not understand their options, they listen to the first person. They don't seek professional help. They don't pursue a loan mod or a short sale, they give up and give in.

Would a bank rather have a foreclosure or a short sale?

[2bindenver]

It's hard to tell what an investor wants, because all the investors have a different philosophy. Most do not recognize this is a long term issue. They hired temps, contractors, off shore personnel all to manage their loans issues.

The servicer's are usually large corporations they get money from the investors to service the loan. They may have agreements that give them more money for loans in default.

[chet everett]

Lots of problems here...

First, despite the FACT the very large number of folks that work for banks in disposing of their troubled assets are amazingly clueless, the vast majority of banks that are making decisions about how to deal with homeowners that are behind on their payments ARE NOT MAKING STUPID DECISIONS about how to deal with the broad issue. If these seems contradictory please follow along: The folks run the REO show are at the bottom of a big pile of you know what. People on many levels above them have made decisions about how to get bad assets that the bank is stuck with off the books in a way that does the least harm to the bank financially and reputation -wise. Sometime the folks making BROAD decisions about how big a loss a lender can sustain from a large group of short sales gives those guidelines to other folks beneath them to carry out the individual deals. Each of those deal making bank employees have their own opportunity to limit the banks' losses by getting more dough, more time, better terms -- some times those employees are also given guidelines from above as to the banks internal outlook on when prices might rebound, and should they take those guidelines to heart they may be able to advance their own career by being the "the guy that slowed us from selling too soon"... Of course those same folks at the bottom of the pile are measured by how much "throughput" they can handle so they tend to be overworked and have competing goals of clearing their inbox and limiting the banks losses. Yucky place to be.

Banks are very capable of 'managing their portfolio' to make sure that they do not allow too many people to "buy low and sell high" at the banks expense. The fact that the do have some lag between when they houses that are part of the "brokers price opinion" that happens before the deal is set AND when they (or another lender) get an appraisal of the property that is likely made up of DIFFERENT houses that may have risen or fallen in value gives room for 'arbitrage' but it is an random and time consuming type and NOT what appeals to most banks who much prefer to be able to assess risk in a more linear fashion.
If you think that a particular property "is a steal" that will cause the bank to more strongly be willing to carry it on the books for a longer period of time.

Second the homeowner / borrower that is behind in their payments may be "messing with the bank" in an attempt to get their loan modified or just get a short sale approved to let them out of situation that they ought not to have ever gotten into. Such a "seller" is not really "on your side" and they certainly are not going to do much to help you 'against' the bank. Depending on whether they want out or to stay they may be either overly welcome to hear your proposal OR violently opposed to discussing anything with you.

Third it is my belief that conditions that existed in many parts of the country of rapidly declining prices and growing chasm between incomes and expenditures have significantly lessened. While I do not anticipate a particularly vigorous upward trend in housing prices I do believe that the decline in inventories that has occurred due to many factors may result in prices spiking in such a way to get some folks out of the funk they have been in. I do not think these spikes will be sustainable unless their is significant growth in incomes, rates remain loan and lending standard remain relatively easy to meet. There is great uncertainty about each of those areas... (and as aside the recent news that consumers are again taking on more normal levels of consumer debt suggest that those who claimed that only by tightening our belts would we survive are going to be again proven wrong by those that understand an appropriate level of debt is a sign of a functioning economy)


As to the specifics of purchasing a home that is not officially for sale I have to tell you that in over two decade of trying to do such a thing I have found this very time consuming and generally unproductive. Even when I have been able to find a home that is clearly neglected with owners that have at least some desire to have the cash instead of the property I have rarely been able to come agreement on a fair price. I suspect this is because of the mindset that prevented them from listing the property for sale in the first place -- yes it is partly denial, but is also a certain kind of 'unawareness' that home is at some level just a pile of wood and plumbing and stuff that has finite monetary value. Even people that do not particularly like or want a particular house have a much more emotional attachment to it than is understandable.

Finally I will caution that you may risk violating requirements that some states have about contacting the courts and the lenders when you attempt to deal with defaulted borrowers. The penalties are generally not enforced when such contact was not made in bad faith to defraud the lender, but you must be aware that any attempt to get the borrower out from under their legally responsible debt could potentially get you into trouble with the courts and the lender...

Good Luck!

[GreatGreenvilleGuy]

1% of owners more than 30 days delinquent have recovered over the past 6 months or so. Chances are it will be foreclosed.

The home can not be sold unless the owner signs off on it. It doesn't matter what has been filed etc. The owner needs to be contacted. Then you can see if they would want you to try to contact their bank to do a short sale. Some banks and servicers have ratios they look for. If its an FHA loan they're pretty much not going to give it away for less than 82% of market value during the first 90 days on the market.

[walidm]

Originally Posted by manderly6

Would a bank rather have a foreclosure or a short sale?

lol...

Now that is one heavily debated question!

[walidm]

Originally Posted by Momma_bear

It's easy enough to get a list of properties that have had a lis pendens filed against them. That is public information in my state and the information is readily obtained for a reasonable price. I realize that not all will actually go into foreclosure.

I understand that I can start a dialogue with the owners. The owners mailing addresses are also public information in my state and the information is easy to obtain.

Let's say one of the owners is interested in having a dialogue with us about selling their home, but they are underwater. What happens then?

Who goes to the bank to try to arrange a short sale? Do the owners do it? Do they hire a Realtor to do it? If they hire a Realtor can we have our Realtor involved and will the bank pay her if a sale is arranged?

Is the bank more likely (or less likely) to move on a short sale if they have already started the foreclosure process?

I understand how a listed short sale works, but I don't understand how it works if I am interested in a property that is not yet listed. It seems that the easiest thing is to have the property listed and let a Realtor handle it. But there is no guarantee that the owners will want to do that, or that the bank would be willing to pay the Realtor.

Has anyone done this?

It has been done. This a part of the marketing strategy employed to pick up short sale leads. The agent prepares the short sale package and presents it to the lender for approval. Under HAFA the foreclosure process is suspended while the short sale is underway. Keep in mind the owners are not happy to look at any mail at this point...(you'd be amazed at the piles of unopened mail in REO properties)

If you can find the owners and walk up to them you're in the best position - what will you say? (Calling could trigger the DNC rules $11,000 fine)

Owner Occupied 1-4 family residence

· $729,750 maximum loan balance
· Applies only to 1st position loans
· Loan was originated prior to Jan. 1, 2009
· Monthly payment exceeds 31% of gross income
· Hardship exist
· Loan is in default or at risk of default

What are the features of HAFA?

· Pre-approved short sale
· Short contract approval or denial
· No “commisionectomy”
· Full release of liability on 1st and subordinate liens
· Foreclosure suspension
· Payment forbearance or reduction
· $3,000 to seller for moving expenses
· Servicer incentives of $1,500
· Investor incentive of $2,000 maximum to release subordinate liens
· Subordinate liens to get a maximum of 6% or $6,000 per lien

What servicer participates in the HAFA program?
Many major banks participate in HAFA. To find out if your lender participates in this program, go to Making Home Affordable - Contact Servicer
Loans that do not qualify for HAFA?

· Freddie Mac and Fannie Mae loans
· FHA and VA loans