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Quick Sale- The Step Before Foreclosure

August 28, 2008 by Admin
In today's economic climate, anyone with a basic grasp of financial terms knows what a foreclosure is, and how America is currently facing a credit crunch due to the record number of home owners defaulting on their loans. What many people are unaware of, however, is the steps which precede foreclosure, and the opportunities they present, both to the savvy real estate investor, and to the distressed home owner themselves. In the pre-foreclosure period, home owners have the option to pursue what's called a "quick sale." In many circumstances, a successful quick sale can save the homeowner's credit rating, and net the real estate investor a bargain. The foreclosure process is a lengthy one- the bank doesn't just step in and take over a home if the owners have missed a single mortgage payment. While the process will vary according to the laws and regulations of the state or county in which the home is located, all lenders follow a basic procedure. When the homeowner falls behind on the mortgage payments, the bank may choose to give them an extended period in which to catch up before initiating foreclosure. Once the decision has been made to move forward, a Notice of Default is filed with the local Recorder's Office and the home is considered to be in preforeclosure. A trustee is appointed by the bank to make all reasonable efforts to contact the owner and work out payment arrangements. If the default has not been successfully mitigated within 90 days of the Notice of Default, a Notice of Sale will be filed and posted, and the property will more into foreclosure. It is during this ninety day period between the Notice of Default and the Notice of Sale that a quick sale can take place to try and salvage the owner's credit rating. A quick sale is only feasible if the owner has significant equity in the property. In a quick sale, the owner offers their property for sale at a price lower than market value, in the hopes of obtaining an interested investor who can complete the sale quickly and circumvent the foreclosure process. In pursuing a quick sale, the defaulting owner must forfeit the equity they've built up in the home to cover the difference between market value and the much lower sale price they negotiate with the investor. By sacrificing equity, however, the owner will be able to salvage their credit score by paying the lender off in full and avoiding foreclosure. Even if the sale process is not complete by the end of the 90 day period, a signed sales agreement with a qualified buyer will most likely convince a lender to hold off on foreclosure proceedings until the sale has been finalized. The flip side of the quick sale is the opportunity for the real estate investor to find a great bargain. Because these homes are offered at a price lower than market value for quick turnaround, a buyer will have built in equity once the sale is finalized. Preforeclosure real estate purchases can be a sound investment strategy, especially in a depressed housing market. While a quick sale prior to foreclosure has the potential to be beneficial to both buyer and seller, each home's situation will be different. It's important to consult with a real estate professional or financial expert prior to proceeding with a quick sale on either side of the table.