Why Do Sellers Go Into Foreclosure?

Sellers stop making payments for any host of reasons. Few decide to get into foreclosure voluntarily. It’s often an unforeseen result from one of the following:

- Laid-off, fired or quit job
- Inability to continue working as a result of medical conditions
- Excessive debt and mounting bill obligations
- Squabbles with co-owner, divorce
- Job transfer to another state
- Negotiating Directly with Sellers in Foreclosure
- Investors who focus on buying foreclosures often would rather purchase these homes prior to the foreclosure proceedings are final. Prior to approaching a seller in distress, consider:
Foreclosure proceedings differ from state to state. In states where mortgages are used, home owners can end up remaining in the property for almost 12 months; whereas, in states where trust deeds are used, a seller has less than four months before the trustee’s sale.
Almost every state provides for some period of redemption. What this means is the seller comes with a irrevocable right within a certain amount of time to cure the default, including paying all foreclosure costs, back interest and missed principal payments, to regain control of the property. To find out more, consult a real estate lawyer.
Many states also require that buyers share with sellers certain disclosures regarding equity purchases. Failure to provide those notices and to prepare offers on the required paperwork can result in fines, lawsuits or even revocation of sale.
Determine whether you’re the kind of person who is able to easily reap the benefits of a seller’s misfortune under these circumstances and / or put a family out on the street. Oh, critics will argue it is simply business and sellers deserve what they get, even though it’s five cents on the dollar. Others will feign compassion and trick themselves into believing they’re “helping” the home owners avoid further embarrassment, but deep inside yourself, you realize that is not true.
Buying a Home at the Trustee’s Sale
Check with your local county office to find out how sales in your town are handled, but common threads among those I see in Sacramento are:
No loan contingency
Sealed bids
Proof of financial qualifications
Sizeable earnest money deposits
Purchase property “as is”
Sometimes buyers are not allowed to inspect the house before making an offer. The issue with purchasing a house sight unseen is that you simply can’t calculate just how much it will cost to improve the structure or bring it up to habitable standards. Nor do you know if the occupant will retaliate and destroy the interior. On top of that, you may need to evict the tenant or owner from the premises as soon as you receive title, and eviction processes can be costly.
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