Rob Alley

1. You can call your bank or lender and ask them to reinstate the loan. You may be allowed to reinstate or make the loan current by paying a lump sum or making scheduled payments to your lender over a given amount of time. Just explain to them you had a few bad months and things are now better and most lenders will try to work something out with you.

Here is an example:
Ed falls behind 3 payments on his house. He pays $2000 a month for a mortgage payment. Then we add on $500 in late fees. Ed owes a total of $6500 to reinstate the loan. He sells a bunch of his personal belongings for $10,000. So he pays the bank, they say "Thank You", and Ed continues to make his regular monthly mortgage payment. The Notice of Default (NOD) is canceled, the home is brought out of foreclosure, and everyone is happy. However, Ed's credit was still hit with the NOD which will hurt a little.

Something similar to reinstating the loan is called a Forbearance Agreement. This is when you actually negotiate a "deal" with the bank. You can ask the bank if they will add on the amount owed in back payments to the back of the loan. You could even ask if the bank would be willing to take a smaller portion upfront and add the rest to the back of the loan. Another option is to ask to pay some upfront and forgive the rest. Or you could even ask to forgive the whole thing. You never know unless you ask. Banks want to work with you, trust me.

2. You can refinance your home. If there is lots of equity in your home and you're not to far behind on payments, this is a great option. Usually the lender would refinance the existing loan and include as part of the new loan any late payments, and fees that you would need to regain control. It would all be "wrapped" into one mortgage. The challenge that most homeowners have is they have leveraged their home to the max. Therefore, very little equity is in the home especially when you add on back payments and fees so it becomes very difficult to refinance.

3. You can list your home with a realtor. If you have equity in the property this can be a great option. However, if you have very little equity, it is very hard to sell homes with real estate agents. The reason why is because you have to pay a realtor fee or commission if they list your house. Typically it's 4-6% of the purchase price. Then what happens is they increase the purchase price of the home to compensate for the commission and now it becomes practically impossible to sell your house when it's at or over market value in such a short time. Plus, buyers cannot qualify for loans if the home is selling for more than what it's worth. You would be better off to try and sell it yourself.

4. You can sell the house yourself. All you need to do is put a FOR SALE sign in your front yard. If you go this route, you should tell everyone you are selling your home, maybe they know a friend or relative who is looking to buy in the neighborhood. If you live in a high traffic neighborhood with listings, you have a very good chance people will call you. In the meantime, as a backup plan, "just in case" you can sell your home to us, we can try to discount the loans so we can buy it. Yes, we also buy houses, and if we are successful, you leave with cash in your pocket and a foreclosure off your record.

5. You can give the property back to the lender. If there are no other liens on the title, the lender may agree to take the property back. This process of transferring ownership from you to the lender under these circumstances is called a Deed in Lieu of Foreclosure, and is sometimes referred to as a "friendly foreclosure" because in essence that what it is. You just walk away. A deed in lieu of foreclosure does not protect your credit, nor will it cut off the rights of junior lien holders. In other words, the lender would take the property back subject to the junior lien holders. This will avoid the possibility of a deficiency judgment in the event the property fails to produce enough to cover the outstanding debts after it goes to auction. So if you have equity in the property this is not a good option. You will give up all rights to receive any surplus from the auction.

6. You can sell your home with us. We will negotiate with your lender to accept a discount on your loan. This is called a short sale. What this does is allow us to buy your home under market value so you can avoid the foreclosure auction. Then we can help you move and get you into a place that will fit your needs.

7. You can file bankruptcy. It is very important you understand how bankruptcy works. Many people use bankruptcy as a scare tactic. There are several different "chapters" of bankruptcy. Some are work-out others are wipe-out, but here is the general idea. When someone files bankruptcy it's almost like someone builds a "bullet-proof" barrier around the house. No one can touch you! However, you are not free of all responsibility and most people do not understand that. We are not a bankruptcy attorney, but you need to know the difference between a Chapter 7 and a Chapter 13 bankruptcy so you know what happens.

Like we mentioned earlier, some bankruptcies are "work out" others are "wipe out". The two that we will focus on are the Chapter 7 and Chapter 13. These are the most common in your situation. Chapter 7 is the "wipe out" and Chapter 13 is the "work out". Bankruptcy is a federal court action designed to help individuals repay their debts or eliminate their debts depending on their circumstances. Chapter 13 bankruptcies are designed to reorganize debts in an effort to repay all debt. Chapter 7 bankruptcies are geared more towards liquidation of assets. Both Chapter 7 and Chapter 13 immediately stop the foreclosure process and any creditors from taking further action against you.

Here is how Ch 7 works.

When someone files a Chapter 7 bankruptcy, all assets are frozen. The attorney will create what is called an automatic stay. Meaning everything "Stays" put. The homeowners can't buy anything, they can't sell anything, and they can't even give away anything. If they try to sell their home, they couldn't. If they try to give away money in savings, they can't. Any unsecured debt like credit cards, unsecured loans, etc. are eliminated or wiped out. They do not exist anymore. Then the trustee or attorney who represents the court and the creditors will look at all the assets (house, car, furniture, equipment) anything of value and decide what must be liquidated to pay some of the debt that was wiped out.

If the homeowners are in the middle of foreclosure, a Chapter 7 will stop the foreclosure process. Usually banks will then ask the trustee to release the property from the automatic stay so they may continue with the foreclosure process. Once the property has been released from the bankruptcy, the foreclosure process starts right where it left off. Typically you have anywhere from 3-5 weeks until the foreclosure process begins again.

Chapter 13 is a little different. When someone files a Chapter 13, they don't take all the assets and sell them. Instead they take all the monthly payments and discount them for penny's on the dollar. It's like a debt consolidation plan. Whatever amount is agreed upon has to be paid to the bankruptcy count every month for the next 3-5 years. So the homeowners get to keep their house, their cars, and all their assets. Now, as long as the homeowner stays current with the mortgage payments and pays the amount agreed upon, they will be fine. However, if any payments are missed, the trustee will dismiss the bankruptcy and the foreclosure process will begin again.

[Note: Bankruptcy should be the last alternative or option and should not be used to stop foreclosure unless you have no other option or else you need the protection of a bankruptcy due to other circumstances or situations you are currently up against. If you feel this may be your best option, please seek legal advise from a competent professional in this field.]

8. And finally, you can just let it go to foreclosure. Basically you don't do anything. Typically you will get evicted after about 2-3 weeks. You leave with nothing in hand and a foreclosure on your credit report. This is without question the worst option of all. Don't let anyone convince you to just give up and do nothing. At least try something. You have nothing to lose. It could mean the difference between a few thousand dollars in your pocket compared to nothing and a foreclosure on your credit.

You should also beware of one other thing that can halt foreclosure. It is called the Soldier Relief Act of 1940. When a property is owned by a person who is in the military and the mortgage payments are not made, then this relief act may stop foreclosure based on certain criteria. The person has to be in active duty in order to qualify. The mortgage loan had to be established before the soldier was called out to active duty. Not only will this stop foreclosure, but it will stop seizure of any personal property while the soldier is actively serving and several months thereafter.

We hope with this knowledge, you now can make the right decision about your home.

To explain this as simple as possible, when you buy a home and get a loan for the home, the lender puts a lien on the property. By doing so, the property becomes collateral for the loan. So, in the event the homeowner is unable to make payments, the lender can force the sale of the home to get paid. There can be several liens at one time on a single property?

Lien priority is based on when things get recorded. So let me give you an extreme example to illustrate lien priority.

Here is an example situation with about everything that you could possibly come by. We have a 1st mortgage for $250,000 with $15,000 in arrears. This would include all back payments, late fees, attorney fees and all the other fees they tack on. This was recorded 6-20-1999. We have a 2nd for $60,000 with $5000 in arrears. Again this includes the back payments and fees. This was recorded 7-21-1999. We have two judgments. One for $2000 recorded 3-2-03, and one for $4000 recorded 4-2-03. We have $3000 in state income tax recorded 5-5-04. We have a $6000 IRS tax lien recorded 10-20-04. And finally we have $5000 in property taxes recorded 2-11-05. Believe it or not all of these are different which we will talk about.

If we take a look at this example, we have a 1st mortgage and we can clearly see it was recorded first in 1999. We also have a 2nd who is clearly in 2nd position. Then we have a couple of judgments. The judgment for $2000 is in 3rd position because it was recorded before the $4000 judgment. So the $4000 judgment is in 4th position. Then we have state income tax for $3000 which is in 5th position.

Here is a simple version.

1st Mortgage -$250,000 recorded 6-20-1999
-arrears $15,000
2nd Mortgage - $60,000 recorded 7-21-1999
-arrears $5000
Judgment 1 - $2000 recorded 3-2-2003
Judgment 2 - $4000 recorded 4-2-2003
State Income Tax $3000 recorded 5-5-2004
IRS Tax Lien - $6000 recorded 10-20-2004
Property Taxes - $5000 recorded 2-11-2005

Are you starting to see the pattern? It's all based upon when you record. Whoever records before another would be in "Senior" position and the other would be "Junior". Hence the terms senior or junior lien holders.

Now we get down to the last 2. These last two have rules which we need to discuss. If we look at when these were recorded, the good ole IRS tax lien would be in 6th position. Now even though the IRS is in 6th position, they have what's called redemption rights. So here is the rule for IRS. It doesn't matter what position they are in, they could be in last position. If there is still equity in the property, they have 120 days to redeem the property. Why would they want to redeem the property? If there is a great deal of equity in the property and they know it, they can use that money to satisfy any tax liens. It is very rare the IRS does this, but it can happen.

Then we finally get down to the state property taxes. All of you need to remember this. This is very important. Here is the rule for property taxes. State property taxes have priority over EVERYTHING. It does not matter when it was recorded. If you look at this example, there is $5000 of unpaid property taxes that was recorded after everything else. It was recorded 6 years after the first mortgage. Guess what? It does not matter. Property taxes always get paid first.

So if we take a look at this example from what we just discussed, and the first is foreclosing - what is the opening bid at the auction? $250,000 + $15,000 + $5000(property taxes) = $270,000. All the other junior lien holders are wiped out if they don't protect their position except for... the IRS tax lien. Remember, they have their redemption period. Now here is something else you need to understand. Even though everyone was wiped out, the junior lien holders can still go after the borrower. This is called a deficiency judgment. Again this does not happen very often but it does happen. A deficiency judgment is an unsecured debt and does not attach to any property. Then depending on your states laws they can collect this debt.

If the 2nd is foreclosing - what is the opening bid? $60,000 + $5,000(arrears) = $65,000 and you are responsible for anyone senior, in this case the 1st of $270,000 for a grand total of $335,000. And everyone junior to the 2nd lien holder is wiped out except for IRS. See why it's so important to know who is foreclosing?

The recent economic climate is providing awesome opportunities for savvy investors. Right now there is an ample supply of empty, under-priced and foreclosure listings of properties in nearly every city in the United States. These properties are available at every price level and in every condition.

Real estate markets will go in cycles. Right now we are really seeing the downward cycle and many foreclosure listings but this trend will sooner or later reverse and the prices will start to rise again. It's inevitable. If you follow the investors maxim of "buy low, sell high" then now is the time to buy homes and foreclosure listings because prices are so low.

There are a few ways to purchase these under-priced properties and foreclosure listings. Right now there are homeowners who are essentially "upside-down" on their mortgage. In a pre-foreclosure sale a lender will allow a homeowner who is delinquent on their payments to sell the home and pay the proceeds back to the lender. If the home will only sell at a price that is less than what the homeowner owes on the note the case is called a "short sale". There are many short sale opportunities available right now. Look at your local MLS or contact a realtor.

Another thing you can do to find great deals in foreclosure listings is to look for foreclosure auctions. The foreclosure auction is most often held at the local courthouse of the county of the property. Just like any auction the property is taken by the highest bidder. Usually the price you can get these foreclosure listings at is very reasonable as there are not often many bidders. The homes are sold "as is" though so be aware that you may have to pay for some repairs before selling or renting the property.

If the bank has to take the home back into foreclosure they will want to get the property off of their books as soon as possible. Therefore they are often very motivated and will lower the price on these foreclosure listings until they are gone. Most often they will use a realtor so check your local MLS. Occasionally they will do some repairs but sometimes they will sell the property "as is". Do your due diligence inspections before you purchase.

Unlike the stock market when you buy real estate no matter what happens to the economy you will still have the property and it will still have some value. Real estate will never lose all of its value and the value will eventually go back up. People will always need a place to live. Because of this, real estate and especially foreclosure listings can be a savvy investment in these uncertain economic times.

When you invest in foreclosure listings, it is crucial to make sure that you do all of the same inspections and due diligence that you would do if you were purchasing the property to live in. You will be responsible for any repairs. It is also important to have your funds in order be it cash or bank financing.

But now is an an opportune time to invest in real estate and foreclosure listings in almost any market in the United States because the prices are low and the opportunity for profit is very good.

Charlottesville and Central Virginia Short Sales, Foreclosures, and Real Estate Explained

Techniques on Financing Foreclosures.

Financing foreclosures is the part of this business that people are worried about most. Most people automatically assume that you have to have money to invest in foreclosures, which is what keeps them from investing. You will be happy to learn that you don't have to have money to start investing. Obviously everyone is in a different financial situation, so not every technique we share with you will work. You just need to find one that works for you and go with it. Even those with bad credit, no money, or no job may capitalize on foreclosure opportunities. In fact, financing foreclosures is the easier part when it comes to buying foreclosures, finding them can be the biggest challenge, unless you know where to look. These are all great techniques which we discuss more in depth in our best selling foreclosure ebooks.
The following are 10 techniques used in financing foreclosures.

Technique No. 1 Assume Seller's Obligations

Technique No. 2 Borrow Against Life Insurance Policy

Technique No. 3 Use Small Amounts of Money From Different Banks

Technique No. 4 Home Improvement Loans

Technique No. 5 Home Equity Loans

Technique No. 6 VA Loans

Technique No. 7 Find a partner

Technique No. 8 Hard Money Lenders

Technique No. 9 Use Banks and other lending instutions

Technique No. 10 Take over "Subject To" existing financing

These are just a few options you have when financing foreclosures. There are many more ways to creatively finance these properties.

3 Stages of Buying Foreclosures

The strategy of buying pre-foreclosures is to create a situation where everyone wins. This type of strategy involves just you, the homeowner, and in some cases the lender. Because the homeowner has been delinquent on his or her mortgage payments, they are now in a position to entertain offers made by investors. Keep in mind, you may not be the only investor looking at this property. However, when buying pre-foreclosures, you can expect very little competition.

When buying pre-foreclosures like this and in turn make a profit, you must do some research on these types of properties. The following are some basic guidelines:

1. locate loans in default,
2. evaluate each property by comparing and contrasting location, price, and property condition
3. narrow your selections to a few
4. inspect the properties
5. determine the property owner's needs, his motivation and flexibility
6. determine the market value of the property, fix-up costs, potential sales price and profits
7. arrange default work out by negotiating with the owner and the lender
8. close on the property, fix it up, and flip it quickly

Buying Foreclosures At The Auction

Buying foreclosures at the auction is a great way to purchase a property under market value. Most properties are auctioned on the courthouse steps. The property is auctioned off to the public and the highest bidder walks away with the property. This can be very rewarding to those who are in a position to buy the property within a short amount of time and can be devastating to those who bid without proper financing in place. Most auctions require a small deposit down of the purchase price on the spot and the remaining balance usually within 1-30 days. So make sure You have you deposit ready and your financing is in order before you bid. If you are unable to get financing within the allotted time, you will most likely lose your down payment, and they will auction the property off again. Buying foreclosures at the auction is also the riskiest place to pick up a foreclosure. You are buying the property in "As Is" condition so it's very important to do your homework before you just go to an auction and bid on a property.

When buying foreclosures at the auction, we recommend you:

1. first visit a local auction to get a feel for the bidding procedure, find out how much is required as a down payment and when the rest is due
2. get proper financing in order
3. research properties and do your homework prior to the auction date
4. calculate potential profits
5. determine the most you will bid for the property
6. follow the property to the auction and participate

Buying Foreclosures that are Real Estate Owned (REO)

Buying foreclosures that are REO primarily involves the lender. REO just means the lender reclaims the property and establishes control over it to minimize its losses. Buying foreclosures that are REO is by far the easiest way to pick up a distressed property. Lender's are always listing properties that come back from the auction, because they don't like excess inventory. They are in the lending business, therefore it is quite easy to find these types of properties. Most of the time they will hire a broker or real estate agent to handle the REO's just because there are so many of them. Lender's in this situation are very motivated, especially if they have a large number of them. These properties are considered to be a huge expense which need to be eliminated. This gives the investor numerous ways to creatively negotiate with the lender on a purchase price. One disadvantage when buying foreclosures that are REO, is that you will pay close to market value for these properties because the lenders will have paid off any outstanding liens, taxes, and other expenses. This is good for you though, because most of the time you will find these types of foreclosures with clear titles.