|
IWP!, flagship product is Chicago's premiere real estate Investment
magazine. Entitled Invest With Passion!, it is the tool for investors and professionals in the
Mid-West. The publication seeks to grow it's market share by providing
powerful information designed to build the reader both as an investor and a
person.
Since it's release in January of 2006, the magazine has been well received and
continues to gain momentum and support. The education, information, and
networking opportunities for the real estate investor has been long neglected.
No More!
The time is now and the momentum is building.
It's Happening!
|
|
ANATOMY OF A FORECLOSURE
Foreclosures are occurring daily at alarming rates across the country.
With so many homeowners experiencing an increase in monthly mortgage
payments due to interest rate adjustments on their adjustable rate
mortgages (ARM), the foreclosure epidemic continues to spread. This
unfortunate situation has resulted in an influx of below market value
properties. We now see properties being sod for pennies on the dollar and
real estate investors are clamoring at the opportunities. For those
seeking to understand the foreclosure process, here we will explore and
dissect the elements.
Notice of Default.
As a
result of the borrower falling 90 days late on the mortgage payments, the
lender files a notice of default (NOD). The NOD puts the borrower on
notice that a default has occurred and legal action may be taken if it is
not corrected. Once filed, the foreclosure process has officially begun.
NOD’s are sometimes referred to as lis pendens, meaning “lawsuit
pending”, because the foreclosure process is a legal lawsuit initiated by
the lender due to the borrower not fulfilling the terms of the mortgage.
NOD’s are a matter of public record and they are sometimes published in
the local papers. In Chicago, many NOD’s are published in the Law
Bulletin, found at the periodical stand in the lobby of Chicago City Hall,
121 N. LaSalle St. Chicago, IL.
Pre-Foreclosure.
Pre-foreclosure is the period of time between the beginning and end of the
foreclosure process. Depending on the mortgage law for the state where
the property is located, this period can vary from 30 days (Texas) to well
over a year (New York).
(See the Title/Lien Theory Map for states) Mortgage law is
based on whether the given state is a title theory or lien theory state.
In
title theory states, the lender holds legal title to property and the
borrower retains equitable title. Equitable title allows the borrower to
retain the right to live in the property, improve it, rent it and enjoy
it. Legal title transferred once the mortgage has been satisfied. The
lender holds the property for security purposes and the borrower has right
of possession. Title is transferred to the borrower once the loan has
been satisfied. In the event the borrower defaults on the loan, the
lender has immediate right to possession and any rents or income from the
property.
(See the Title/Lien Theory
Map for states)
In
lien theory states, the borrower holds legal and equitable title to the
property and the mortgage becomes a lien on the property. The lien is
released once the mortgage has been paid in full. In the event the
borrower defaults, the lender must go through the formal foreclosure
process to obtain legal title. In some states, the process includes a
statutory redemption period in which the borrower can redeem the property.
The foreclosure process can be very lengthy and costly for lenders.
(See the Title/Lien Theory Map for
states)
Some
states have adopted the intermediary theory, which is a hybrid of the lien
and title theory. In intermediary theory states, the borrower retains
legal and equitable title and the mortgage is a lien like the lien theory
states. However in the event of default, the lender is allowed to take
possession of the property like the title theory states (utilizing the
foreclosure process governed by the state). For example, Illinois is a
intermediary theory state and the foreclosure process takes about 12
months. In addition during the foreclosure process, the borrower has a
redemption period which allows them to reclaim the property by satisfying
the delinquent payments.
The
pre-foreclosure process creates opportunities for investors to work a deal
with the homeowner to satisfy the delinquent mortgage in exchange for deed
to the property. There are a wide variety of ways to structure these
deals that include (“subject to approval”) existing loan staying in place,
cash payments, and short sales. (These strategies will be discussed in
later posts.) Bottom line: Buying before the close of the foreclosure
process presents opportunities for investors to profit.
Sheriff Sale.
If
the borrower fails to pay during the redemption period, the property is
sold at a sheriff sale. This is commonly known as the auction. The
county sheriff executes the sale of the property during an oral auction.
Mostly investors are in attendance, because full payment is due 24 to 48
hours following the auction. There are no sixty-day closings.
Real Estate Owned (REO).
Properties not sold at the auction or sheriff sale are collected by the
lender. In most instances these properties are listed to be sold. Often
times, banks have particular real estate brokers that sale their
properties. On the multiple listing service (MLS), you will notice these
properties labeled as bank owned or real estate owned properties. That
wording signifies the property is a foreclosure that did not sale during
the auction. These properties also create investment opportunities.
Homeowners
For
homeowners, foreclosures can be a nightmare. There are many legitimate
organizations that assist homeowners that are facing foreclosure. If you
are a homeowner facing foreclosure, visit
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm to locate HUD approved
counseling agencies in your area.
Investors
For
investors, foreclosures can be opportunity. It is no secret that
investing in real estate is a viable mean for creating wealth. Tour our
website at InvestWithPassion.com for practical and useful real investment
information.
See
Map Below
 |
|
|
