ForeclosureBusinessNews.com: “Foreclosure News the Average Joe Can Use!”

Highly respected Certified Foreclosure Specialist, Tara-Nicholle Nelson, a writer for the industry-leading real estate website Trulia.com, wrote an interesting article entitled, 5 Mortgage and Foreclosure Myths, On March 9^th for the site.

Can You Qualify for a Home Loan with Bad Credit?

Even though Ms. Nelson is an expert, I respectfully disagree with a couple of her points, ie: (i) Buyers with bad credit can qualify for home loans; and (ii) if you don’t have equity, you can refinance.

Today, we’re going to take a look at why I disagree with her point that buyers with bad credit can qualify for home loans. In a not-too-distant future post, we’ll discuss why I believe it remains difficult to refinance if you don’t have any equity in your home.

Note: I was a mortgage consultant (2005-2006) right before the foreclosure crisis hit. Hence, I saw first-hand a lot of what went on (and what went wrong) that got the housing market in this mess.

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Home Loans with Bad Credit: Why Many Buyers Can’t Qualify Even Though In Theory It’s Possible

Ms. Nelson writes about qualifying for FHA loans with bad credit:

At a FICO score of 620, buyers can qualify for FHA loans at many lenders with only 3.5 percent down. With a score of 580, the lenders are looking for more like 5 to 10 percent down – they want to see you put more of your own skin in the game, and the higher down payment lowers the risk that you’ll default.

While in theory potential homebuyers can qualify for mortgages with scores this low, the actuality of the matter is, it’s going to be darn hard to do so. The reason is, usually, when someone has FICO scores this low, it signifies they have problems handling money.

One of the things that dings a credit score the most is late payments – usually on unnecessary unsecured debt like credit cards. This says to potential lenders that you are a credit risk and they are unlikely to offer you a home loan with this kind of patterned behavior on your credit report.

Another thing is, most lenders want a down payment now, as Ms. Nelson notes. Zero down home loans are basically a thing of the past for the foreseeable future (I personally don’t see them ever coming back to the degree they were before this most recent home foreclosure crisis hit).

But the reality is, many who have credit problems (ie, those with credit scores like 580), don’t have 5% to 10% down payments. According to the June 3, 2009 article on Forbes.com entitled, Down Payment on Home Out of Reach for Half of U.S., Poll Finds, the average home price in America is just under $200,000.

What does this mean for a down payment? As the article states:

With the average home price in America just below $200,000, a 20 percent down-payment is near $40,000, a nice chunk of change by any standard. . . . The NFCC [National Foundation for Credit Counseling] recently asked consumers about their ability to meet the down-payment requirements . . . Of the more than 2,000 respondents, almost half (49 percent) admitted that they’d never be able to save enough money for a down-payment on a home.

Even a low down payment of 3.5% is $7,000. And don’t forget, this is just the down payment. This doesn’t take into account closing costs.

Getting a Home Loan with Bad Credit: Don’t Forget About Closing Costs

Just how much are closing costs?

Well, they run 2 to 4 percent of the purchase price. So on even on the low end at 2%, on a $200,000 home, that’s another $4,000.

So now we’re looking at at least $11,000 and that doesn’t include the incidentals – moving costs, getting furniture and home peripherals, eg, window coverings (which can be expensive as heck). This can run another few thousand dollars easily.

See why I think it’s unlikely that if you have bad credit (eg, a 580 FICO score), you’re unlikely to qualify for a home loan?

That being said, I do think there are those with bad credit who can qualify. Who are they? Well, let’s take a look.

Who Can Get a Home Loan with Bad Credit: The Ideal Candidate

Potential buyers with bad credit – that has not been a part of their overall history – are still good candidates for mortgage loans. The reason is, lenders are taking the recent foreclosure crisis – and the economic factors that contributed to it – into consideration.

So for example, if you had perfect credit for years and years, then lost your job, ran through your savings and fell behind on credit card payments and other bills, then it’s easy to see why “all of a sudden” your credit is bad.

But, if you’re recovering – eg, you found a new job, have caught up your bills and have started saving again – a lender will take these factors into consideration when you go to apply for a mortgage loan.

Note: Learn how to repair your credit quickly and get on the road to home ownership.

A Key Difference Between Potential Homeowners Trying to Get a Home Loan with Bad Credit

But the key difference between this type of potential buyer and the average person with bad credit is that bad credit wasn’t a normal part of their financial history. Circumstances – which everyone these days understand – caused it, and this type of person is reverting to their natural ways (eg, paying bills on time, saving, etc.) now that they are back on their feet, so to speak.

See the difference?

So yes, while in theory it remains possible to get a mortgage loan with bad credit, you have to be a pretty perfect candidate. And if you’re not, the only way to become one is time – start saving, start paying off credit card and other unsecured debt, start living with your means, etc.

All of this signals to a potential lender that even though you’ve may have been irresponsible in the past with your finances, you’ve learned your lesson and are now on the right track.

And, that’s when you’ll qualify for a home loan – even with bad credit.

Related Posts

Home Foreclosure: The New Credit Standards to Qualify for a Mortgage Brought on by the Crisis

Home Foreclosure News: Owning a Home Becoming a Lot Harder for Lots of Americans Because of the Foreclosure Crisis

Foreclosure & Credit: How Does Foreclosure Impact Your Credit Report?

Home Loan Help: Documents Needed to Apply for a Mortgage Modification with HSBC (and Other Lenders)

First-Time Home Buying Advice: Is It Better to Buy a New Home than a Foreclosed Home?

Foreclosure Advice & Credit Card Debt: Can Credit Card Companies Put a Lien On Your Home?

P.S.: Like this post? Follow Foreclosure Business News on Twitter.

Copyright © 2011 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.

ForeclosureBusinessNews.com: “Foreclosure News the Average Joe Can Use!”

According to the article, Homebuilder ads highlight pitfalls of foreclosures, on Businessweek.com today, the latest ads from homebuilders are highlighting the advantages of buying newly constructed homes rather than foreclosed properties. But, is this really in your best interest if you’re looking to buy.

First-Time Home Buyer: Is it In Your Best Interest to Buy a Newly Constructed Home as Opposed to a Foreclosed Property?

As with most things in life, it’s not that simple. And, as a home is often the largest purchase most of us ever make, it takes some careful consideration.

One of the best ways to figure out if buying a new home or a foreclosed home is best for you and your family is to do a simple pros and cons list. There’s nothing like seeing it in black and white to make it real.

To that end, following are some pros and some cons of buying new homes vs foreclosed properties.

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First-Time Home Buying Tips: Pros of Buying a New Home vs a Foreclosed Home

Pro: You’re the first one to live there (this is a sentimental/emotional factor you can’t afford to ignore).

Pro: You have more input and can put your “personal style stamp” on the property while it’s being constructed. New home-buying tip: Don’t be afraid to ask for what you want. If you prefer a different type of sod than the one being used, ask for it. On inexpensive things like landscaping, you’d be surprised at what some builders will agree to.

Pro: You choose whether or not to buy from that particular builder. Hence, you can do your due diligence on their reputation in the industry.

Pro: You can make sure that the home is up to par by having it inspected during various stages of the construction process. This means you won’t have to worry about the use of banned/hazardous materials (eg, lead paint), and shoddy workmanship (if you keep a close eye).

Pro: Home maintenance issues will ostensibly be years away (eg, roof replacement, HVAC servicing, floor and cabinet refurbishing, etc.). And if there are major issues, they are usually covered by some type of home warranty.

Pro: Get out your “I want” home buying checklist! You can often negotiate with the builder for extras, eg, include the major appliances, higher-quality countertops, more decorative light fixtures, etc.

Pro: Newer homes are often more energy efficient than older (possibly foreclosed) ones. Energy-efficient legislation like the Clean Energy Act of 2007 has come down the pike in the last decade or so that dictate this to a certain degree.

First-Time Home Buying Tips: Cons of Buying a New Home vs a Foreclosed Home

Con: New homes tend to cost more than foreclosed homes.

Con: Often, what you see is not what you get. Model homes often have the upgrades that make you fall in love with it. These often aren’t included and cost extra if you want them.

Con: For the most part, there’s little to no negotiating on the price of a newly constructed home because they have to keep the appraised value on all the homes in a neighborhood. So, for example, if they cut your purchase price by $20,000, they’d in essence be lowering the price for all the homes in the neighborhood.

Con: Paying for neighborhood amenities – In many new home subdivisions, there are amenities like pools, tennis courts, club houses, etc. And, you pay for them. If you purchased a foreclosed property that’s not part of a subdivision, you don’t have to worry about this.

Con: In light of the foreclosure crisis, it’s harder to qualify for home loans now. You have to have almost perfect credit (ie, a 750 or better FICO score) and put down a larger down payment (5-20% or more). And forget zero-down home loans; they practically don’t exist anymore.

It’s a lot easier to come up with $10,000 as a 10% down payment on a $100,000 foreclosed property than to come up with $20,000 as as a 10% down payment on a $200,000 newly constructed home, no?

Note: Got Bad Credit? Learn how to repair your credit so you can be “mortgage ready” – whether you’re buying new construction or a foreclosed property.

Conclusion: Pros and Cons of Buying a New Home vs. a Foreclosure Property

Of course, there are many more factors to be considered when buying a home, eg, school system, property taxes, commuting distance, etc.

The bottom line is, no one can decide what is right for your family but you when it comes to whether to buy a foreclosed property or a new home. But, these are just some factors to be aware of as you think through the process.

Related Posts

Because of Home Foreclosures, Buying a Home Is Cheaper than Renting in Almost 75% of Largest American Cities

Want a Mortgage? Why It’s Tougher to Qualify Now & Why That’s a Good Thing

Home Foreclosure News: Owning a Home Becoming a Lot Harder for Lots of Americans Because of the Foreclosure Crisis

How the Foreclosure Crisis Started: Investors, Speculators, Mortgage Fraud & Lax Lending Standards All to Blame

P.S.: Found this post informative? Follow Foreclosure Business News on Twitter.

Foreclosure homes for sale are all over the place now. And, many newbies are jumping into the market trying to capitalize – either as an investment or for their primary residence. But, just because a home is in foreclosure does not mean it’s going to be a steal.

There are three types of foreclosures. Following is what they are – and which one is the best bargain.

Foreclosure Homes for Sale: The 3 Types of Foreclosed Properties Explained

Preforeclosure Properties: As the name suggests, these properties are still with the owners; they haven’t been put on the auction block, so to speak. BUT, they’re headed there.

Many times, you can get good deals from owners who may be willing to do short sales, let you take over payments, etc. Of course, all of this has to be approved by the lender. Remember, until a home is completely paid off, it still belongs to the bank so you just can’t make a deal with the owner. You’ll always have to be approved by the bank as well.

Courthouse Sales (Sheriff’s Auctions): These are exactly what they sound like. The lender is selling the home at auction to the highest bidder.

Now even here, while there are deals to be had, it’s not as cheap as you’d think. Lenders put a home on the market starting at what’s owed on it usually. So, if a homeowner owes $150,000 on a house that he paid $185,000 for 10 years ago, for example, the banks starting bid will be $150,000.

You have to have your financing all lined up because if you win a bid, you have to pay up rather quickly. And, there’s no home inspection beforehand. This is why experts advise leaving these types of “deals” to those who know what they’re doing, eg, professional investors.

Otherwise, you could wind up with a lemon of a home, having to sink more in repairs than you bargained on. Not the best way to go if you’re a newbie.

Repossessions: If a home doesn’t sell at auction, it stays with the bank (the lender). Banks/lenders are not in the real estate selling business. They’re in business to loan money. It’s important to know this because they try to unload these repossessions (REOs, which stands for real estate-owned properties) as quickly as possible.

You can pick up a good deal here because number one, the property didn’t sell at auction. So lenders are more eager – which means they may drop the price, do special financing offers and even do repairs (just don’t expect cosmetic repairs). And another thing, you get to have an inspection here (unlike with courthouse sales of foreclosed homess, where the properites are sold “as is”).

If you’re new to buying foreclosed homes for sale, preforeclosure properties and repossessions are the ones to go after.

Foreclosed properties bought at sheriff’s auctions are just too risky. Learn more about foreclosure homes for sale for new investors.

P.S.: Start a Business Cleaning Foreclosed Properties. While the foreclosure crisis has been a nightmare for many, it has presented a perfect small business opportunity for others. Learn how to start a foreclosure clean up business. Read how one foreclosure cleaning business owner rakes in $40,000/wk (not a typo).

P.P.S.: Like this post? Follow Foreclosure Business News on Twitter.

Copyright © 2010 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.

Foreclosure Business News’s editor will be on vacation from Monday, May 24 through Monday, May 31st. The site will be updated again on Tuesday, June 1st. Meanwhile, enjoy the following posts.

Foreclosure Cleanup Business Advice

Foreclosure Cleaning Business Owners: Advice from a Banker Who Handles Foreclosed Properties on How to Land Foreclosure Cleaning Jobs

How to Bid on Foreclosure Cleaning Jobs: Inside Peek at an Actual Foreclosure Cleanup Bid

Foreclosure Cleaning: How to Get Non-Foreclosure Cleaning Jobs

Foreclosure Cleaning Business Advice: One Sure Way to Make Your Company Stand Out from the Competition

How to Get More Foreclosure Cleaning Jobs with Postcards

Cleaning Foreclosure Properties: Learn How to Price Jobs by “Spying” on the Competition

Foreclosure Cleanup: Why Winterization is a Lucrative Service to Offer on Foreclosed Homes

See complete library of ebooks on foreclosure cleanup and how to invest in cheap foreclosures.

Buy Foreclosures Cheap Advice

Foreclosure Homes for Sale: Why the Time to Buy is Now, Especially for First-time Homebuyers

How to Buy Foreclosures Cheap, Retire Early & Secure Your Financial Future

Stopping Foreclosure Advice

Foreclosure Lawyer: Need One? How Not to Get Ripped Off & Choose the Best One

Home Foreclosure News: Obama Admn Offers New Help for “Underwater” Homeowners  

Home Foreclosure and Your Credit: Details of the Mortgage Forgiveness Debt Relief Act of 2007

Stop Foreclosure: More than 90 Days Late on Your Mortgage? Here’s a Foreclosure Prevention Program for You

California Foreclosure Law: How to Stop Foreclosure Even If Your Home Is Sold at Auction

Home foreclosure auctions are good news for some, but bad news for others. Here we take a look at the biggest advantage and disadvantage of them.

The Biggest Advantage of Home Foreclosure Auctions

Obviously, it’s a deal for the buyer — this is the biggest advantage. But those in the community benefit as well — on several fronts, ie:

Removes Crime Threat: The longer a foreclosed property stays vacant, the more of a crime magnet it becomes, as discussed in the post here, How Foreclosure Cleanup Companies Are Keeping Neighborhoods Safe.

Raises Property Values: This is a long-range benefit. But, the more foreclosed homes are sold — whether at auction or not — the more home prices can stabilize and then start to rise. As long as there is a glut of foreclosed properties on the market, home prices continue to depreciate, as discussed in this news report on the advantages of home foreclosure auctions.

It features a California community where “foreclosures and short sales (homes that are not yet in foreclosure but are being sold to prevent foreclosure) represent close to 50 percent of the region’s real estate market.”

Keep these positives in mind when you hear all of the disheartening news about home foreclosures.

Now, for the bad news . . .

The Biggest Disadvantage of Home Foreclosure Auctions

When someone loses their home to foreclosure, it affects not only the property owner at hand, but the community as a whole. Why/how?

Because homes are appraised based on what the homes in a given area — uusally a 1 to 3 mile radius — have sold/can sell for. So when someone comes along and pays $100,000 for a home at a foreclosure auction, but you paid $150,000 for yours just four years ago, it drags down the value of your property as well.

So the biggest advantage is that – in the short run (which can last for a few years) — foreclosures in the community drag down the property values of the surrounding homes. For how long depends on a number of factors, eg, the economy, the housing inventory, amenities in a community, etc.

But again, this is usually temporary. Housing prices usually do bounce back. How long you’re prepared to ride it out is the real question as to how deeply you’ll be impacted. If you love your home and don’t want/need to sell it, while it’s losing value definitely is not something you want, it’s not something you’re likely to lose a whole bunch of sleep over.

BUT, if you need to sell it for any reason — a move, downsizing for retirement, to pay off medical bills, etc. — it can definitely cause a lot of sleepless nights.

As with anything in life, it’s a matter of perspective.

P.S.: Start a Business Cleaning Foreclosed Properties. While the foreclosure crisis has been a nightmare for many, it has presented a perfect small business opportunity for others. Learn how to start a foreclosure clean up business.

Copyright © 2010 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.

If you’re thinking of getting your piece of the real estate pie by doing some foreclosure investing, you need to be very careful. For, while you can make a lot of money investing in foreclosures, there are a lot of pitfalls too.

Here, we’re going to discuss foreclosure investing as it relates to buying properties that have right of redemption periods.

Foreclosure Investing: What are Right of Redemption Laws

IN essence, it’s a law that many states have that permits homeowners to “redeem” their property, even after it has been sold as a foreclosure. To learn more about Right of Redemption laws, see the post, Right of Redemption Laws: How to Get Your Home Back – Even After It’s Sold as a Foreclosure.

Now that you know what right of redemption laws are, it should be pretty obvious that when doing foreclosure investing, you have to be extremely careful because you could be out an investment – and plenty of money – before you know it.

Foreclosure Investing: Property Investors Rights and Realities When Buying Right of Redemption  Properties

1. Know the Redemption Period in the Jurisdiction in Which You’re Buying: This period is set by state law – and it varies widely. It can be anywhere from a day on up to two years (Tennessee).

If the redemption period ends by the time you purchase the property, then great, no worries. BUT, if the period extends beyond the sale date – and many do – then you need to know the following.

2. Don’t Fix Up Property Until Redemption Period is Over: Why? Because you can lose this investment capital. How?

Owners who exercise their right of redemption are not required to pay back any monies an investor has spent in fixing up the property. They are only required to pay mortgage arrears, taxes and fees the lender incurred in selling the property.

So, if you buy purchase a foreclosed property and fixed it up before the redemption period is over AND the owner hits the jackpot or in some other way comes up with funds to purchase the property back, any monies you spent in fixing, repairing and upgrading the property is your loss.

3. Buy Redemption Rights from Owner Where Possible: Many new property investors who are just getting into  “foreclosure investing” aren’t aware that they can buy the redemption rights from an owner . . . and usually for only a nominal amount (eg, a few thousand dollars).

Usually, a homeowner facing foreclosure will do this because they’re going to lose the property anyway, and they don’t see a way to redeem it in a year or two. Face it, most people’s financial situation just doesn’t turn around that quick.

So, selling those rights gives them some ready cash.

4. Buy Foreclosed Properties via Redemption Rights: What we mean by this is, buy the rights from the homeowner first, then use those redemption rights to buy the property after it has been foreclosed on. This can save you a lot of money as an investor.

To explain, let’s pretend you want to buy a property that has a fair market value of $100,000. There’s a first mortgage on it for $50,000; a second one for $40,000; and a contractor’s lien for $10,000.

The lender with the first mortgage (the one for $50,000) is the one who is foreclosing. This lender will get money from the foreclosure sale. Whether the property sells for enough will determine whether the second mortgage lender or the mechanic’s lien is wiped out.

Eg, i it sells for $50,000 or less, the second lender and the mechanic lien holder won’t get any funds.

Now comes the interesting part . . .

If you hold the redemption rights, you can swoop in after the home is sold in foreclosure and pay the redemption price ($50,000), plus any late fees, interest, etc. Even if these added another $20,000 to the price, you will still have bought a property with $30,000 in equity in it (remember, the fair market value is $100,000).

5. Line Up Your Financing: Have all of your financial ducks in a row if you plan to buy foreclosed properties using this method, or you could lose out on a good deal. Particularly in these foreclosure-ridden times, many sellers (especially if they’re lenders) want cold, hard cash.

6. Resolve Title Issues: There can be more than one party with redemption rights on a property. So, make sure the title is completely clear.

P.S.: Buy cheap foreclosures and have a $45/month mortgage — really! 

Copyright © 2009 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author

Foreclosures, foreclosures, foreclosures – you can’t turn on the news without hearing about it. And, as you’ve always wanted to invest in real estate, you figure, “I’m ready to take the plunge; I want to buy bank foreclosures.”

If you’re ready to roll up your sleeves and put in some work, here is one way to buy a foreclosure – and perhaps help out a struggling homeowner at the same time.

What is a Pre-Foreclosure?

In case you don’t know, pre-foreclosure is the time span between when a homeowner (borrower) becomes late and when the property is officially foreclosed upon by the lender. This time period can be anywhere from a few weeks to a year or more. It all depends on the foreclosure laws of the state/county involved – and these vary widely.

Many struggling homeowners are happy to speak with investors (you), as they desperately want to sell before they are officially foreclosed on. This is especially true if they know that there is no hope of hanging onto their home. And, this means opportunity for investors because they can purchase a property directly from the owner before the bank forecloses.

Foreclosure Properties for Sale: How to Find Pre-Foreclosures to Buy (Locate Foreclosure Lists)

Finding pre-foreclosure properties for sale is easy and can be accomplished in a number of ways, ie:

Public Records of Foreclosure Listings: As home ownership and default info is part of public records, all you have to do is research public notices in your area. This can be very time consuming, but if you’re in no rush and plan to make real estate investing part of your financial portfolio, it can be worth the time invested.

Online Sources of Foreclosure Lists: There are so many sites online that offer information on pre-foreclosure properties for sale. Be careful when purchasing, as the information can be incomplete, outdated and just downright useless.

One of the most reputable sites on the web for purchasing any kind of real estate-related info is RealtyTrac.com.

Realtors a Great Source for Foreclosure Listings: If you know a realtor, you’re in luck. They are a great source for finding pre-foreclosure properties for sale for they have access to the MLS (Multiple Listing Service). This database can only be accessed by licensed realtors.

It is the primary data system that most real estate agents use to market and sell property. Three-quarters of all properties sold are located and sold via the MLS.

Bank Websites Have Foreclosure Listings: Many banks –especially the larger ones – list their properties (REOs) for sale on their website.

Property Preservation & Management Companies List Foreclosures: Just like banks, many of these will have foreclosure listings on their websites.

Steps to Take to Buy a Pre-Foreclosure

The process can be involved, but basically you would take the following steps:

(i) Locate Lis Pendens: A lis pendens is a written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Source: Wikipedia.

(ii) Find Financial Info about Property: This would include finding out about how much is owed on the property and which bank holds the note (the mortgage loan).

(iii) Determine Your Offer: You would do this by finding comps to get an idea of what the house is worth. You can hire an appraiser, or if you have a friend who is a realtor, get them to give you info on sales from the MLS.

Don’t forget to figure in your costs associated with the purchase, ie, closing costs, realtor fees (if you use one), appraiser fees, etc.

(iv) Contact Homeowner: Once you know all of this info, it’s time to contact the homeowner(s).

Now, this can be a little sticky because this is undoubtedly a very stressful time for the homeowner(s). They may or may not be receptive to your offer. Hence, it’s best to send them a letter instead of calling – at least at first.

Remember to approach them in an “I’m here to help” manner instead of an “I’m in this to make a profit” manner.

Buying Pre-Foreclosures: The Right of Redemption Law

Note: Does your state have a “Right of Redemption” law? If so, you need to be careful about buying pre-foreclosures. Basically, this law allows homeowners “reasonable opportunity to reacquire the property, provided certain guidelines are followed.”

For an example of how these laws read, see one county in Georgia’s Right of Redemption foreclosure law.

Foreclosure Laws: Don’t Buy a Foreclosure Until You Know the Laws of Your Jurisdiction

Each state and local municipality has its own set of foreclosure laws. Know them before you make any real estate investment – whether you’re buying it in pre-foreclosure, as an REO property or from the steps of a courthouse auction.

P.S.: Buy cheap foreclosures and build a real estate fortune!

P.P.S.: Found this post informative? Follow Foreclosure Business News on Twitter.

Learn more about how to find preforeclosures for sale from this founding member of RealEstateInvestor.com.

Copyright © 2009 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.

The foreclosure crisis has caused many foreclosed homes to flood the market. What this means is a great opportunity for real estate investors looking to buy foreclosed homes (REO properties) cheap. Many of these are new investors who don’t understand the different types of properties available for sale.

Hence, a common question is, “What’s the difference between a regular foreclosure and an REO foreclosure?” Following is the answer.

Home Foreclosure: What Does REO Mean?

It means real estate-owned. It’s a nice way of saying the bank owns the property; they’ve “repossessed it so to speak”. So when you see a listing for an REO property, it has already been foreclosed on and has gone back to the bank.

A “regular” foreclosure, on the other hand, is a process whereby a property is in the process of being sold. It can be bought at auction (those selloffs on the county steps) by an interested party, ie, an investor or a new homeowner.

A Pro and Con of Buying REOs

Pro: They can be bought cheap. The rationale behind this is simple – banks are a business and they lose money when they have foreclosed properties on the books. Banks/lenders lose on two fronts with REOs: (i) money going out; and (ii) no money coming in.

Money Going Out: There are carrying costs with foreclosed properties that the banks have to pay. After all homeowners insurance still has to get paid; HOA dues still have to get paid; and maintenance has to take place.

No Money Coming In: Nobody’s paying the mortgage, so the bank is not making any money.

Con: Oftentimes, banks don’t do repairs on REO listings. You’re often buying them “as is”. Remember, banks are a for-profit business. They’ve paid the carrying costs for the property since the previous owner stopped paying the mortgage.

As you usually cannot get disclosures as to the history or condition of the property, you could be buying a cash-sucking cow when you invest in REOs. There could be all kinds of problems – expensive ones like wiring, roofing, contractor liens, etc.

If you’re thinking, “I’ll get an inspection done beforehand, “ think again. You might not have the chance, depending on when the property goes up for auction and how the auction is carried out in your municipality.

In spite of all of this, purchasing an REO property is a great way to buy foreclosures cheap.

P.S.: Business Opportunity: Learn How to Start a Foreclosure Cleanup Business. Read how one foreclosure cleaning biz owner makes up to $40,000/wk .

P.P.S.: Found this post informative? Follow Foreclosure Business News on Twitter.

In the Epoch Times article, First Home Buyers Out in Droves, Foreclosures Snapped Up, Peter Flint, the founder and CEO of multi-listing site Trulia.com states:

Foreclosures are at the heart of the housing crisis . . . Consumers are more interested than ever in buying foreclosures . . . First time home buyers have some money, have stable jobs, they have been sitting on the sidelines waiting. This is a way for them to get on the first rung of the housing ladder.

First-time Homebuyers Snapping Up Foreclosure Homes for Sale

The Effect of the Obama Administration’s $8,000 Credit for First-Time Homebuyers

Truer words have never been spoken than those by Mr. Flint. And, the government is incentivizing this mindset, offering an $8,000 credit to first-time homebuyers. This credit can be used in a number of ways, eg, as a down payment.

Housing experts say this is definitely contributing to the red-hot interest in foreclosure homes for sale.

Does This Mean that the Foreclosure Crisis is Getting Better?

While interest in foreclosure homes for  is up, the market is still being flooded with them — and will be for some time to come – as discussed in the post, Bank-Owned Foreclosures Mounting: 600,000 to 700,000 Still Not on the Market.

Foreclosures are Selling: What This Means for Foreclosure Clean Up Companies

Many enterprising entrepreneurs are have started foreclosure cleaning business, or are thinking about starting them. What this means for foreclosure cleaning companies is quite simply, more business. Why/how?

Many foreclosures are sold “as is”, which means they still have to be cleaned, cleared, repaired, painted, etc. And, new homeowners are overwhelmed enough. The vast majority are neither equipped to tackle these jobs themselves and/or don’t want to. So, they hire full-service foreclosure cleaning companies to do the work.

And, even if a foreclosure home for sale is not sold “as is,” it is the seller (ie, bank/lender) who will have the property cleaned and readied for its new owners. Again, they pay full-service foreclosure cleaning companies to do the work.

Foreclosure Cleaning: Why It’s An Evergreen Business

And, this is why real estate services companies (which is what a foreclosure clean up comapny is ) is such a good business. No matter what the economy at large is doing, homes are bought and sold every day. And, when it needs work, real estate clean up companies are needed.

It just so happens that foreclosures dominate the news now, so this is why so many focus on “foreclosure cleaning.” But, a property is real estate. And, real estate needs are consistent and ongoing — things get broken, yards need to be cut, walls need to be painted, floors need to be repaired, properties need to be winterized, locks need to be changed, pools need to be drained, etc.

All of these are real estate services — services that just happen to be provided by the red-hot “foreclosure cleaning companies” now. So go ahead, get in while the sector is sizzling, knowing that you have a business that can withstand good and bad economic times.

P.S.: Learn now to buy foreclosures cheap — as cheap as $45/month — really!

Copyright © 2009 Yuwanda Black for Foreclosure Business News

Do you have an extra $45 per month?

Do you have an extra $1.50 per day?

If so, you can buy foreclosures cheap, pay them off quickly, retire early and live off rental income. Sound too good to be true? It’s not — and here’s why.

The foreclosure crisis has led to thousands of homes on the market priced under 10K. If you have an extra $45 per month to throw towards a mortgage payment (just an extra $1.50 per day!) you can snap these up and start your real estate investment empire.

3 Reasons to Buy Cheap Foreclosed Houses — NOW!

Less Risk: The lower the cost of the property, the lower the risk. If you’re a first-time investor, this is an excellent time to start with practically no risk.

Market Supply & Demand: As mentioned above, the mortgage meltdown and ensuing foreclosure crisis has caused the market to be flooded with cheap HUD homes, reo properties, short sales and a host of other kinds of cheap foreclosures.

Banks are not in the real estate business; they’re in the lending business. But, they have so many foreclosed properties on their hands now though that they’re being forced to be in the real estate (ie, property management business). Hence, they’re doing everything they can to sell as many of these properties as they can. This spells opportunity for those who are savvy enough to take advantage of this information.

No Bank Loan Required: If you have “latte money,” you can scrimp, scrape, borrow, beg and steal to come up with enough to outright purchase a property for 10K or less. That way, you don’t have to worry about getting a bank loan.

Even if you have to sit on the property for a while and not do anything to it until you saved up enough money to start repairs and renovation, 9 times out of 10, the land the house is sitting on is more than what you paid for it — so you’re already a profitable real estate investor.

Get Firsthand Advice for a Real Estate Investor, Landlord and RE Cleaning Company Owner

In the newly released ebook, How to Invest in a Home for Under 10K & Have a $45/Mo Mortgage!, the author explains everything you need to know about investing in what she terms these “dusty muffins.”

You’ll learn:

How to find properties for under 10K to invest in;

How to run the “investing numbers” and what they mean;

How to research the best areas in which to buy cheap foreclosures;

Why you should pay cash (if you can) for cheap foreclosures;

What Section 8 is and why it can be profitable when you buy cheap foreclosures;

Prepare for unexpected repairs (ie, how to plan for them so they don’t blow your budget);

Pitfalls to avoid when buying cheap foreclosures; and most importantly

How to buy cheap foreclosures and start creating wealth (you’ll be amazed at how the numbers add up AND how quickly they add up!)

AND SO MUCH MORE!

Cheap Bank-Owned Properties: A Once in a Lifetime Opportunity

The sheer numbers of these types of houses on the market make it an excellent time to invest in foreclosures and set yourself up to retire early and be secure financially – forever.

Copyright © 2009 Yuwanda Black for Foreclosure Business News