Why Investing In Foreclosure Can Still Be Financial Uproar
Foreclosure- is the legal and professional proceeding in which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption. Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. http://www.zowes.com
If the borrower defaults and the note buyers to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to foreclose the equitable right of redemption. Other lien holders can also foreclose the owner's right of redemption for other debts, such as for overdue taxes, unpaid contractors' bills or overdue homeowners' association dues or assessments.
Investing in foreclosures has been a profitable business for decades. Only a few years ago it was so popular among real estate investors that foreclosures were only selling at a 5-10% discount. No longer is that the case. Why is that? It’s due to a combination of things. I mentioned the smaller number of real estate investors, so that decreases the pool of potential buyers and thus decreases demand.
On top of that, the glut of housing inventory extends the time it takes to sell a property. Why is this important? Because when a bank forecloses on a mortgage, it becomes the owner of the house. Banks are not in the business of owning real estate. They don’t want to own the house. While owning the house, this means that their money is tied up in the physical asset of the home, and is therefore not available to lend to someone else.
Lending money is a bank’s business. Not real estate. So, the longer it takes to sell a property, the more likely it is that a bank will take a low and lower price. They want to get rid of it – off their books. This, again, is a very good thing for us, as they love the services of mortgage note buyers. There are more properties, better deals; all at much lower prices. http://www.zowes.com
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