Ways to Buy Property after Foreclosure
Being the owner of property has been the cornerstone of America since its inception as a nation in 1776. While there have been great strides to help all U.S. citizens become property owners, the past few years have nearly stripped the dream of homeownership away.
Since 2008, around 6 million property owners have lost their home to foreclosure. While there was a decline in foreclosure filings last year, experts predict that 2012 will include another round of massive foreclosures that could result in as many as 2 million additional homes being repossessed.
If experts are correct, there is certain to be further decline in home values. This could trigger a rise in the amount of people that choose to enter into strategic default. This tactic has received considerable media coverage because it is quite controversial.
In the past, strategic foreclosure was used mainly by individuals with exceptional FICO scores that let them recover quickly even from major events such as foreclosure. Property owners can afford to pay mortgage payments, but instead choose to stop paying in attempt to force lenders into some sort of negotiation.
Due to the fact that mortgage lenders don't provide loan modifications or foreclosure alternatives to buyers that aren't experiencing financial hardships, some property owners choose to walk away from their home rather than pay installments for property that isn't worth the paper the loan is written on.
Although there is an abundance of negativity surrounding the real estate market, people with an optimistic view are discovering ways to benefit from the current state of affairs. Realizing that millions of displaced homeowners need living quarters, savvy real estate investors are purchasing properties to offer as homes for rent to foreclosed property owners.
A lot of people might consider this a risky practice. After all, if people didn't pay their home loan payments why would they pay rent? By all means, investors must perform due diligence to make certain tenants can afford rental payments, but evicted homeowners often make exemplary tenants.
Even better, quite a few foreclosed homeowners would love nothing more than to buy another house, but they can't qualify for bank loans for at least 2 to 3 years. They have no choice but to become tenants until they improve their credit rating.
One strategy many investors are using to improve positive cash flow is to offer houses for sale using alternative financing strategies. Some of the more popular include: lease purchase option agreements, take over payments, subject to, and seller carry back mortgages.
Each strategy involves establishing real estate contracts to legally document the transaction and purchase terms. It is advisable to hire an attorney to execute sales contracts and record them with appropriate agencies.
Lease purchase agreements are a good choice for people that can't afford a large down payment. This method lets buyers reside at the property as a tenant while working toward purchasing the home. Buyers secure the sale by providing sellers with a down payment and a percentage of the monthly rental rate is applied toward the sale price.
Take over payments allows buyers to assume remaining mortgage payments while using the property owner's good credit rating. Careful thought needs to be given before entering into this agreement. Most mortgage notes include a payable in full clause that requires borrowers to pay off the note if the property is sold or transferred.
Subject to agreements transfer property rights to buyers in exchange for paying mortgage installments. Mortgage notes stay in the seller's name until buyers are able to qualify for bank financing.
Seller carry back mortgages are a form of owner financing. Sellers can provide full or partial financing for the property that is being sold. Seller carry back isn't any different than bank financing, but sellers usually don't carry the loan for more than 2 to 5 years.
Since 2008, around 6 million property owners have lost their home to foreclosure. While there was a decline in foreclosure filings last year, experts predict that 2012 will include another round of massive foreclosures that could result in as many as 2 million additional homes being repossessed.
If experts are correct, there is certain to be further decline in home values. This could trigger a rise in the amount of people that choose to enter into strategic default. This tactic has received considerable media coverage because it is quite controversial.
In the past, strategic foreclosure was used mainly by individuals with exceptional FICO scores that let them recover quickly even from major events such as foreclosure. Property owners can afford to pay mortgage payments, but instead choose to stop paying in attempt to force lenders into some sort of negotiation.
Due to the fact that mortgage lenders don't provide loan modifications or foreclosure alternatives to buyers that aren't experiencing financial hardships, some property owners choose to walk away from their home rather than pay installments for property that isn't worth the paper the loan is written on.
Although there is an abundance of negativity surrounding the real estate market, people with an optimistic view are discovering ways to benefit from the current state of affairs. Realizing that millions of displaced homeowners need living quarters, savvy real estate investors are purchasing properties to offer as homes for rent to foreclosed property owners.
A lot of people might consider this a risky practice. After all, if people didn't pay their home loan payments why would they pay rent? By all means, investors must perform due diligence to make certain tenants can afford rental payments, but evicted homeowners often make exemplary tenants.
Even better, quite a few foreclosed homeowners would love nothing more than to buy another house, but they can't qualify for bank loans for at least 2 to 3 years. They have no choice but to become tenants until they improve their credit rating.
One strategy many investors are using to improve positive cash flow is to offer houses for sale using alternative financing strategies. Some of the more popular include: lease purchase option agreements, take over payments, subject to, and seller carry back mortgages.
Each strategy involves establishing real estate contracts to legally document the transaction and purchase terms. It is advisable to hire an attorney to execute sales contracts and record them with appropriate agencies.
Lease purchase agreements are a good choice for people that can't afford a large down payment. This method lets buyers reside at the property as a tenant while working toward purchasing the home. Buyers secure the sale by providing sellers with a down payment and a percentage of the monthly rental rate is applied toward the sale price.
Take over payments allows buyers to assume remaining mortgage payments while using the property owner's good credit rating. Careful thought needs to be given before entering into this agreement. Most mortgage notes include a payable in full clause that requires borrowers to pay off the note if the property is sold or transferred.
Subject to agreements transfer property rights to buyers in exchange for paying mortgage installments. Mortgage notes stay in the seller's name until buyers are able to qualify for bank financing.
Seller carry back mortgages are a form of owner financing. Sellers can provide full or partial financing for the property that is being sold. Seller carry back isn't any different than bank financing, but sellers usually don't carry the loan for more than 2 to 5 years.
