Tuesday, February 19, 2013

Bank Owned Foreclosures, Pre Foreclosures & Wolves, Oh My!

By Bob Walton


Foreclosures happen for a variety of reasons and are not always a matter of poor financial planning. Unexpected things like an unexpected job loss could wipe out a family, and their savings accounts. Though emotions can run high from the loss of a home, it should not be cause for shame; current statistics indicate that 1 out of every 200 homes will be foreclosed on, per the Mortgage Bankers Association. Let's take a look at what's involved.

REO (Real Estate Owned) properties are those which end up being owned by a lending institution who originally held the first mortgage. These are the ones which failed to sell at auction, usually because the opening bid was never reached. Once the auction is concluded, the property is listed on the REO sheets, where bank employees work them to continue attempting to make a sale.

After the courthouse auction, if there are not bidders that met the minimum price the lien holder set, the property becomes an REO. Asset Management Departments then look for NRBA (National REO Brokers Association) Real Estate Brokers to market and list the properties for them. Lending institutions are not usually set up to be real estate management companies, and would rather not have rental income, when they could sell the property and get it off of their books.

A below market opportunity exists when the lender needs to move the property to get it off their financial records, and they offer it up at below market value. Distressed properties can fall under this category because they have sat empty for so long that no maintenance was continued, and the structure could have fallen into bad repair.

HUD/VA properties are not owned by the government, nor did the government put up the money to purchase the properties. These agencies only guaranteed the loan, in the event the borrower failed to be able to continue making payments. Once that happens, the government ends up with possession of the real estate, and they are listed on their site as foreclosures.

Pre-foreclosures can be a win-win situation for all parties concerned. In these situations, the lending company has to agree to allow the owner to remain in the home. This prevents a family from being dumped out in the street and become homeless, but it also protects the lender by having the home occupied and less chance of vandalism. The owner is still responsible for the condition of the property.

Short Sale is another name for pre-foreclosures, and the lender has agreed to let the family continue living in the house. There are some possible financial incentives involved in these through an agency program known as HAFA. But, the property is allowed to be shown by Realtors, while the family is still living there.

Foreclosures are something which simply happens in life, and are not always an intended outcome. Rules and regulations apply to the proper handling, of these circumstances, by all parties concerned. Whether it is the buyer, lender or person whose property is foreclosed on, these properties are eventually for sale.




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