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Understand The Causes Of Foreclosure
Foreclosure is the process by which a lien holder takes back ownership of property because the homeowner has failed to repay the money taken. A homeowner is typically foreclosed when they fail to pay 3 or more payments. The amount of time it actually takes for your lender to auction off your property varies greatly.
The basic causes of foreclosure are:
Number 1: Divorce" Make sure you know who is on the warranty deed and whose signatures will be needed if you do a pre foreclosure deal.
Number 2: Loss of job: If this is the case, you can help them by offering to help them repair their credit and to avoid having a foreclosure or bankruptcy on their credit records.
Number 3: Financial Slippage: This is the situation in which most smart and hard working individuals in foreclosure find themselves. We live in a capitalist system society. The system creates more chances but it is also less forgiving. Long term unemployment is overwhelming to the middle class. So is the astronomical cost of health care. People in this category frequently resort to tapping equity in order to meet their ends. If matters do not get resolved quickly, the house becomes over mortgaged; they default and end up in bankruptcy. Foreclosure comes next.
Number 4: Over Indulgent Lifestyles: It is often that people live at or beyond their means. For these people, as soon as there is an income disruption, extra expense or similar event, mortgage payments become impossible to pay.
Other Causes: Illness, no medical insurance, or death of the property owner or family member. You may be able to offer to help them with credit repair. Perhaps you can assist them in negotiating with their mortgage company, by showing all their medical bills and receipts. This is part of creating good will for your business. If you help them now, perhaps you will see them in the future, or they will give you referral business
Foreclosure Scenarios
Another consideration is handling the foreclosure property. You must consider if the product is over encumbered, that is, if they owe more than its worth, or if they have equity.
If they have equity and depending on the amount, you may consider a pre foreclosure deal offering them equity split. In that case, they would benefit by not having a foreclosure on their credit report.
Finally, evaluate your exit strategy. You will have a lot of options, depending on your needs or your business plan.
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