Pre-Foreclosures & Fixer Uppers

What is Mortgage Pre-Foreclosure?

Preforeclosures are usually considered to be properties where a Notice of Default has been filed in a Deed of Trust state, or a mortgage related Lis Pendens has been filed in Maricopa county recorder. Simple click here at Maricopa county recorder and SELECT the field document code: N/TR SALE

DISTRESS SALE HOTLINE

Call for a FREE List of Arizona Homes in Foreclosure

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"AZ Foreclosure Hotline"

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(800) 872-1550 x123

With the current economy hurting everyone's income, property owners across the United States are experiencing bank foreclosures in record numbers. If homeowners fall behind in their mortgage payments, the bank has the right to sell the property at a public foreclosure auction to pay off the loan.

To avoid home foreclosures, losing equity, and damaging their credit, troubled homeowners need to sell their homes as quickly as possible, and therefore will do so at a very low price.
And don't worry about taking advantage of anyone. You will actually be helping the homeowners by keeping them out of foreclosure. You will help them to save their credit and salvage some of their investment, and at the same time you will make a big profit for yourself. In most cases, you are the homeowners' last resort before they lose their property to foreclosure. The homeowners will actually thank you for helping them out of a financial nightmare!

Check out the latest homes which are getting ready to hit Foreclosure in Maricopa county. There are over 120 homes daily being forced into foreclosure. If you would like a current list of homes to come on to the market for pre-foreclosure please fill out the general buyers form at the bottom of this page.

Let us know if you would like a list of Fixer uppers and homes in Foreclosure. This is a great way to get into the investment real estate market. Its never too late.

The Short Sale

What is a Short Sale?

A short sale is a legally-binding agreement to allow a home to be sold for less than the amount that is owed. And, while short sales are not by any means common or easy, because of increasing inventory levels and foreclosures in some parts of the country, lenders are much more eager to negotiate with borrowers who are having trouble paying their mortgages. For potential home buyers and real estate investors, a short sale also offers a great opportunity to purchase property at a significant discount.

However, don't expect a lot of help from the lender without first providing a sales contract from a qualified buyer and all the information required by the lender's loss mitigation department.

Of course, lenders are not looking to bail out "flippers" or other borrowers who simply overextended themselves. In most cases, a borrower must have suffered a serious financial hardship that directly caused him or her to default on the mortgage: the loss of a job, a serious illness, or the death of a loved one. In addition, the borrower must be at least 91-days delinquent before a lender will even discuss a short sale.

A written declaration and supporting documentation demonstrating financial hardship will definitely be required by the lender. This may include pay stubs, tax returns, and liquid asset statements, among other documentation.

Key Considerations to Keep in Mind

The lender will likely issue a 1099 to the seller for the difference between what is owed and the final amount the lender collects after the costs of the sale, including real estate commissions and possibly other charges. This means that the difference or deficiency can be considered as taxable income to the borrower. Some lenders may even attempt to get the existing homeowner to sign a note for the remaining amount due.

If there are multiple liens against the property, all lien holders will have to be involved in the negotiation process, not just the first lien holder. Therefore, communication and patience are essential components of any short sale. This is why an experienced real estate agent and mortgage professional become so valuable to this process.

Call me. Let's discuss how we can market short sales and other foreclosure alternatives to potential buyers and sellers as a unique selling proposition that clearly separates us from the competition.

3 tips on buying a foreclosed home

Sure, banks are anxious to sell foreclosed properties and you can get a decent price. Here's what you need to know before you shop.

(Money Magazine) -- Meet the latest desperate home seller: the bank. According to RealtyTrac, lenders repossessed 197,800 homes in the first four months of 2008 vs. 90,800 in that period last year.

Banks don't want to be in the real estate business, so sometimes they'll accept much less than you might think to get the darn things off their books - especially in markets having lots of trouble. But buying such properties has drawbacks.

Here's what you need to know.

1. Use the Web

Websites can help you find foreclosed homes. On Redfin.com, you can do a free search for so-called real estate owned (REO) properties - those for which the bank holds the deed - in Baltimore, Boston, Los Angeles, San Diego, San Francisco, Seattle and Washington, D.C. (and soon, Chicago).

Or you can locate them nationwide on Foreclosures.com or RealtyTrac.com for a subscription fee of $49.95 a month.

2. Use a Realtor

Forget buying directly from the bank (lenders typically deal only with pros) or at auction (you may wind up bidding more than you should).
Work with brokers; banks use them to sell most homes. Once you've identified which properties are REO, you'll know those are the ones for which a low-ball offer is more likely to be accepted.

3. Watch out for repair costs

Look for houses that have been on the market for more than 90 days and offer 10% to 30% less than asking.

Bank-owned houses typically need a lot of work: People facing foreclosure often neglect maintenance and may have swiped fixtures and appliances on their way out.

Never buy an REO property without an inspection, and be sure to factor repair and remodeling work into your offering price. According to a recent survey by Remodeling Online, replacing a bathroom alone costs nearly $16,000, on average.

FNMA/FHLMC Credit Guidelines

When the borrower’s credit history includes significant derogatory information, the lender must confirm that the borrower has re-established an acceptable credit history and that sufficient time has elapsed since the date of the last derogatory information. We generally require four years to elapse before we will consider the borrower to have a re-established credit history. We will, however, consider two years as an acceptable interval for re-establishing a credit history when the derogatory information in the borrower’s credit record resulted from documented extenuating circumstances** or when the derogatory information relates to a Chapter 13 bankruptcy (regardless of the reasons that contributed to the bankruptcy).

Elapsed time is measured by comparing the date of a new mortgage application to the date that (1) a Chapter 7 or 11 bankruptcy was discharged, (2) a Chapter 13 bankruptcy repayment plan was successfully completed and the bankruptcy discharged, (3) a foreclosure sale was held, (4) a deed-in-lieu was executed, or (5) an issue related to any other significant derogatory information was resolved.

When a borrower’s previous credit history included a bankruptcy or foreclosure-related action, all of the accounts in the borrower’s credit report must be current as of the date of the mortgage application. In addition, the borrower’s credit record under the re-established credit history must include:

•

a minimum of four credit references, with at least one of the references being a traditional credit reference and one of the references being housing-related. (Housing-related references should cover the period following the bankruptcy discharge, foreclosure, or deed-in-lieu and can be in the form of mortgage payments or rental payments. If rental payments were not reported to the credit repositories, the borrower must provide copies of bank statements, money orders, or canceled checks for the most recent 12-month period as a supplement to the rent verification. Three of the four credit references (including any rental housing reference) must have been active in the 24 months preceding the date of the mortgage application.);

•	no more than two installments or revolving debt payments that were 30 days past due in the last 24 months;

•	no installment or revolving debt payments 60 or more days past due since the discharge or completion of the bankruptcy or the completion of the foreclosure-related action;

•	no housing debt payments past due since the discharge or completion of the bankruptcy or the completion of the foreclosure-related action; and

•	no new public records for bankruptcies, foreclosures, deeds-in-lieu, preforeclosure sales, unpaid judgments or collections, garnishments, liens, etc., since the discharge or completion of the bankruptcy or the completion of the foreclosure-related action.

FHA Credit Guidelines

Previous Mortgage Foreclosure. A borrower whose previous principal residence or other real property was foreclosed or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for a new FHA-insured mortgage. However, if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower and the borrower has reestablished good credit since the foreclosure, the lender may grant an exception to the three-year requirement. Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area.

VA Credit Guidelines

Foreclosures (9/15/04). The fact that a home loan foreclosure (or deed-in-lieu of foreclosure) exists in an applicant's (or spouse's) credit history does not in itself disqualify the loan. The lender must develop the facts and circumstances of the foreclosure and you must apply the guidelines provided for bankruptcies filed under straight liquidation and discharge provisions of bankruptcy law.

Bankruptcy Filed Under the Straight Liquidation and Discharge Provisions of the Bankruptcy Law (07/20/07) You may disregard a bankruptcy discharged more than two years ago. If the bankruptcy was discharged within the last one to two years, it is probably not possible to determine that the applicant or spouse is a satisfactory credit risk unless both of the following requirements are met:

1) the applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period, and

2) the bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified. Divorce is not generally viewed as beyond the control of the borrower and/or spouse. If the bankruptcy was caused by failure of the business of a self-employed applicant, it may be possible to determine that the applicant is a satisfactory credit risk if

–	the applicant obtained a permanent position after the business failed

–	there is no derogatory credit information prior to self-employment

–	there is no derogatory credit information subsequent to the bankruptcy, and

–	failure of the business was not due to the applicant's misconduct.

If a borrower or spouse has been discharged in bankruptcy within the past 12 months, it will not generally be possible to determine that the borrower or spouse is a satisfactory credit risk.

All of the above information for FNMA/FHLMC and FHA/VA can be reduced or waived, if the loan is run through the agency's corresponding Automated Underwriting System (AUS) and the loan receives an "Accept" disposition. All documentation required by the automated approval, however, must be met.

Although lengthy, I hope this information helps you educate your clients on the affect of major derogatory information on their future borrowing ability.

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Pre-Foreclosures & Fixer Uppers

Greg Sidoff