© alexskopje – Fotolia.com

“Ex-Wall Street executives” as they are called in the media, have formed dozens of new capital investment companies and Real Estate Investment Trusts for the purpose of buying up foreclosures by the tens of thousands. The general idea is that all these foreclosures will be rented to people who can no longer obtain a mortgage. But this is not a foregone conclusion for all foreclosures.

Buying foreclosures is not, in and of itself, an investing strategy, whether you intend to rent them or not. Foreclosure is a fundamental. It is a fundamental because it represents the status of a property. It is a circumstance if you will, not a plan for making money.

Renting a property for cash flow is an investing strategy because it is one of a number of choices you may have, with regard to how you will make money with a particular property. Foreclosed properties are a source of potential leads, but even after you buy the foreclosure, there is no guarantee that you’ll make money with it.

People seem to think that simply buying foreclosures guarantees that they will automatically make money, but that is not true. I’ve seen dozens of cases where a property was purchased after a foreclosure, but the plan to make it cash flow or produce a profit did not pan out as expected. This usually happens because other fundamentals were ignored, and the strategy that was chosen was ultimately undermined by the fundamentals.

Strategies are the choices you make about how to buy, sell or hold a property. Fundamentals are the circumstances pertaining to the specific property or the local real estate market, that cannot be changed. You don’t have a choice about fundamentals, they are what they are. (For a detailed explanation of real estate investing fundamentals and strategies, you can watch my videos on youtube, here). A property that has been foreclosed on has the fundamental issue of being a foreclosure. That may mean you can get a better deal on it, but this is not guaranteed.

Foreclosures are a large pool of available properties which are relatively easy to find these days, but making money with them depends on your abilities as an investor, and your choice of investing strategy. For example, what if I told you I can sell you a 3 bedroom, 2 bath foreclosure for only $40,000. Is that a good deal?

It may sound like it. But what if I also mention that there is significant termite damage and other items that will require another $45,000 for repairs? Is that still a good deal? (repairs are another fundamental issue). If the property happens to be located in a very high income area, and will resell for $200,000 after those repairs, is it a good deal now? (location is one of the most important fundamentals).

Or, what if you find out that you can’t get a permit to renovate this foreclosed property because your desired renovation is a violation of the neighborhood zoning laws. That is another fundamental issue. I’ve seen folks buy a foreclosure because they thought it was a good strategy to buy a foreclosure, only to discover that unanticipated repairs or other problems completely ruined the profit potential.

What if the foreclosure you bought does not fit well with your choice of strategy? Rental is all the rage right now, because everyone seems to think that everyone else is going to have to rent a home. But what if you bought a foreclosure, then discovered you can’t rent it because there are 25 other houses in the same neighborhood that are also for rent. There are lots of fundamental issues that can lead to your success or failure; supply-and-demand-ratio is a big one.

Buying a foreclosure does not guarantee that you will automatically make a profit from renting it, especially if your mortgage payment is $900 per month and you discover that you can only rent the property for $700 a month. Oops–that mistake is more common than you think.

So when you see those tantalizing advertisements offering you a “great deal” on a foreclosure, don’t assume that this is a “great opportunity”. Do your due diligence, and determine the ideal strategies you may use to cash flow that foreclosure if you do buy it. There are limits on what you should pay for any specific foreclosure, and the fundamentals in your particular area will help determine whether you should rent it, sell it, or stay away from it.

You can’t be sure that any foreclosure is a great opportunity for an investment until you have done your due diligence, run your numbers, and checked it out thoroughly. Then you can make an informed decision about the right choice of strategy, once you are aware of all the fundamental issues involved.

The key to profitable real estate investing strategies lies in knowing the fundamental issues in play, and then choosing the correct strategy that will work with those fundamentals. As fundamentals change over time, so also, will your strategies.
——————————————————————————————————————————–
Donna S. Robinson is a real estate investor, author and investing coach located in Atlanta, GA. Follow her on twitter at donnaconsults, Facebook.com/RealtyBizConsulting and watch her videos on youtube. Her latest book, Basics of Real Estate Investing, is now available for Kindle on Amazon.com

These folks are ordinary men and women who began life without the benefit of parents or family who handed them an existing business. They began with nothing, had no special advantages, and have become successful on their own. The last names have been omitted to protect their privacy, as most of the REAL real estate investors are not selling seminars and prefer to keep their activities private for the most part. If you have not read part one, you can access that article here.

Image courtesy of cali.org via flickr.com

Investor Number 3 – Andrew

Andrew worked for many years at a corporate job. While working he spent much of his commute time listening to educational CD’s recorded by well known real estate investors, as a way to educate himself about the business of real estate investing. Andrew was also a regular attendee at many of my own investing classes at a local investor association as well. While working a full-time job, he spent all of his free time studying, listening and reading books on various investing topics. In short, he did everything he could do to educate himself about investing.

About 3 years ago, the corporation that Andrew worked for announced that they would be laying off some people in response to the recession. Andrew saw this as his opportunity to escape the corporate grind, and start really getting involved in real estate full-time. He went to his boss and volunteered to give up his job. The boss obliged and Andrew set out to become a real estate investor. He had saved some cash and had several thousand dollars to work with when he left his job, and a few months severance pay to keep his bills paid. But he had to hustle and get something going as quickly as possible.

Since Andrew did not have a track record, he could not go out and borrow money from a bank when he began. So, he decided that he would focus initially on buying cheap mobile homes which he could fix up and resell with owner financing. Andrew is also handy with tools and has a strong work ethic. He soon found his first mobile home and bought it. It needed lots of work, but he stuck with it until he got all of the repairs finished, marketing the property for sale while he did the repairs. By the time the repairs were completed, just a few weeks later, he had it sold for more than double the price he paid for it. He also took back a note for the financing, earning additional income from the interest on the note.

In just three years time Andrew, who also studied to become a skilled negotiator, had bought and sold quite a few mobile homes and had built up a nice cash flow. Of course there have been some bumps and bruises along the way. One of his mobile home buyers sold the carport cover to get money to make his payment. Andrew had to inform the buyer that selling the place in pieces in order to make the payment would not be allowed! And he’s had a repo here and there, which he has resold to other buyers. That is all part of the business. But Andrew worked hard and quickly established himself in his local area.

Today Andrew has built up a track record and has been able to establish himself with several local banks. As a result, he has recently completed the purchase of his first major commercial property, financed with a bank loan, and has seen his income and net worth grow well beyond what it was when he was working his corporate job. He now owns a variety of residential properties and is developing a strong presence in commercial investing as well. And he’s done all of this in just a little over 3 years, right in the middle of a recession.

Investor Number 4 – Bruce

Bruce is the kind of guy who is so laid back and non-assuming that you’d never know he is a true real estate guru unless you knew him personally. There are no suits, no limos, and no ego. But Bruce knows his stuff when it comes to real estate investing.

Bruce has a very simple but very successful investing business. He finds great deals on nicer homes in the better parts of town, rehabs them as needed, updating appliances and fixtures to make the properties highly desirable, and resells them to owner occupant buyers who get a new loan. This means that Bruce collects a nice cash profit at closing. He is usually in and out of a deal in just a few months, realizing a profit in the range of $30K to $50K per property, on average, depending on the price range of the home.

Occasionally Bruce finds an extra good deal, such as the time he found a brand new home that was part of a builder foreclosure. The home had 1800 square feet of living space, granite counter tops and had never been lived in, as the builder had gone under before the home could be sold to an owner occupant buyer. Bruce bought the home from the bank for $20,000 cash. Since it was located a good distance from his home, Bruce elected to flip it for some quick cash. He sold the home to another investor just a few days later, and picked up a ten grand net profit for what amounted to just a few hours work. He could have made more, but Bruce also likes to leave money on the table for his investor buyers.

Each of the investors I have featured in parts one and two of this series has worked hard to learn their business, found niches in the business that work best for them. They all have developed their expertise over time. These folks are familiar with a wide range of investing strategies, but they tend to focus on one or two that fit their skills and lifestyle best. They only do deals that make sense, they know how to “run their numbers”, and they keep it legal. As a result, all four of them have become wildly successful real estate investors.

Donna S. Robinson is a real estate investor, author, and investing coach located in Atlanta, GA. Follow her on twitter at donnaconsults, Facebook.com/realtybizconsulting Her latest book, Basics Of Real Estate Investing is now available on Amazon.com for the Kindle reader.

According to the National Association of Realtors, there has been an increase in housing affordability for those who are able to obtain a mortgage. Lawrence Yun, an economist for the Association says “Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power.”

In spite of this optimism many people still face difficulty in qualifying for a mortgage, and every month 83,000 new families entered the foreclosure process which means roughly 1,000,000 families are entering foreclosure every year. The pressure on Washington to help ailing homeowners means guidelines which have been a mainstay for years are taking effect.

Chris Apodaca, a California mortgage broker for Broadview Mortgage says “It’s an interesting phenomenon because three or four years ago these people were losing their homes. Now they’re out shopping for a new home. It wasn’t swift and sweeping legislation that did it, simply a matter of perseverance. These folks waited three years and now they can buy again.” Apodaca is targeting those who have found themselves being dragged through the mud during the recent economic crisis and was asked whether or not these people should trust banks again. His reply was “We’re seeing a cautious optimism. The industry has really shifted with the tightening regulations and strict licensing laws. Home buyers have a clearer path to recourse should they be wronged. We as banks know that there are serious ramifications for banks who violate the law.”

Apodaca writes for consumer education website findmywayhome.com which gets numerous inquiries from people who want to ask questions, get updates on legislation or who simply wish to share their stories. Many of these people feel they have been wronged and are angry, but Apodaca recommends they plan for their future and gain empowerment through education. People who lose their home through foreclosure are eligible to purchase again three years after the foreclosure is finalized.

© Andy Dean – Fotolia.com

Lenders are verifying home values with automated systems, broker price opinions (BPOs) and in some cases, appraisals. In short, they are ensuring that offers accepted reflect current comparable properties. Despite what lenders publicly say, there is little motivation to complete a short sale; foreclosure is not a bad option for them or one they shy away from.

Key points for buyers interested in short sales to remember:

• Most agents price short sales to generate offers, it is likely and often a virtual certainty that there will be multiple offers and that the accepted offer will be at or above list. Going in 20% lower is likely a waste of time.
• Lenders look at the net amount of an offer. A full price offer with 5% in closing costs is not a full price offer. Look at the net, lenders will.
• Keep the offer clean and simple. Cash is king and so is simplicity, focus on the net amount and demonstrate the ability to close quickly. The fewer stipulations and the shorter the time frames the better.
• Homes are almost always transferring “as is”, repairs are almost never completed.
• Don’t be surprised if the lender counters. Most short sales are not “binding” until approved; in GA it’s fairly common for lenders to counter an offer that’s been under review for weeks or months. Right or wrong, this typically happens as a result of their research on market value. In many cases, it’s wise to challenge poorly prepared BPOs and an experienced agent can often successfully appeal them.
• Don’t be surprised if the process drags on and on. As noted, lenders are mostly ambivalent about short sales; foreclosure is not a bad thing for them. As many former owners and many buyers will note, dealing with the bureaucracy can lead to aggravation, stress and ulcers. The most important thing for a particular seller and buyer is merely one of hundreds for a lender, and they treat it as such.
• Don’t be surprised if the deal falls apart. A short sale has many variables that are completely outside of the buyer’s control. Of all involved, the buyer has the smallest and least influential role after contract acceptance. Often, buyers grow weary of the process and terminate realizing that the ends do not justify the means.

WatchThisProperty.com

Tenants are often the innocent victims when a rental property goes into foreclosure and many are unsure of their rights. The Federal Protecting Tenants at Foreclosure Act ensures that all legitimate tenants are given at least 90 days’ notice to vacate the property. Tenants in this unfortunate position can be subjected to harassment from real estate agents, bank representatives and law firms, and can receive illegal or inaccurately written notices. Often the new owner fails to communicate properly with them, and may fail to maintain the property. The aim of WatchThisProperty’s service is to alert tenants about the change of ownership, inform them of the new identity of the owner, and the laws protecting them.

Dean Preston, executive director of the Tenants Together, California is only statewide organization for renter’s rights, says “WatchThisProperty.com is a great resource for tenants wishing to learn the foreclosure status of their home or future home for free. This consumer-oriented and well-designed site will help countless tenants avoid rental scams and unscrupulous landlords.”

WatchThisProperty enables tenants to check out prospective landlords before renting a property, and during a tenancy. The company was founded in 2011 and is comprised of a team of consumer advocates, technology, legal and real estate professionals. At the moment the service is currently only available in the California, but should soon expand across the United States.

Main image © Scott Maxwell – Fotolia.com

The predicted market trend were based on what would happen after the government investigation into faulty paperwork on the banks providing home loans’ side. After all foreclosure investigations would have been concluded, there would have been a large number of homes that then lenders would resell, thus causing the drop in prices. However, two years after the government stepped in to investigate and even after the five biggest mortgage servicers in US settled the case with the federal and state regulators at the beginning of 2012, the wave of foreclosures still failed to come. The big players paid $25 billion, but the deal with banks also meant they were forced to cut deals with homeowners.

Data from the National Association of Realtors shows the index of pending home resales climbed 5.2% in October, while the median price for home sales in the same month was up 11% from 2011, the steepest annual increase since November 2005. Not such a big surprised if one considers the fact that 309,385 borrowers were given loan relief by the five largest U.S. mortgage servicers since March 2012. A report by Joseph Smith released in mid November shows a little under 22,000 borrowers had principal forgiveness totaling $2.55 billion, while another 113,000 borrowers won bank approval for short sales, meaning $13.1 billion in principal writedowns.

The wave of foreclosures seems even further with federal government loan-modification programs and as interest rates that reached a record low led to a spike in mortgage refinancing, helping homeowners to keep up their payments by decreasing the sums they have to pay every month. “The Federal Reserve Bank of New York had estimated that as many as 1.8 million properties would be taken back by banks in 2012. Yet through October, there have been only about 559,000 home seizures, according to RealtyTrac,” state John Gittelsohn and Prashant Gopal of Businessweek.

“In hindsight, by delaying and prolonging the foreclosure process, that gave the market time to stabilize and get back on its feet,” says Daren Blomquist, vice president of RealtyTrac, which warned a year ago that huge numbers of foreclosed homes were going to hit the market. “Maybe bureaucracy is actually helping, in this case, to diffuse the impact of the foreclosures. Talk about unintended consequences.”

While the number of properties for sale is extremely low, it does not mean there were no foreclosure sales. Institutional investors such as Blackstone Group and Colony Capital have actually bought thousands of foreclosed properties in bulk, long before they hit the market, but instead of reselling them, they chose to rent them.

While the facts contradict expert’s predictions, massive foreclosures hitting the market is still quite the threat, especially as a quarter of US homeowners still owe more than their property’s worth and as the economy has not made a full recovery as of yet.

Photo source

There has been a lot of speculation throughout 2012 about whether this law would be extended. It appeared in August that a deal might be in the works, as the senate had approved their version of a plan to extend debt forgiveness. But as far as I can tell the election has derailed this effort and I’ve seen no mention of any concrete plans to reach an agreement on an extension.

There is much talk about avoiding the fiscal cliff, but since housing news is, (erroneously), reporting that a “housing recovery” is underway, there is even less impetus on the congress to worry about this particular piece of legislation. And it seems that the government is much more efficient at removing tax breaks than they are at adding them.

In the present climate there are plenty of bigger “fish” to focus on, given the fact that we only have 7 weeks left in 2012. With the holiday season rapidly approaching, there is very little time for congress to move decisively on this particular issue. As a result, I think it’s becoming highly likely that the Mortgage Debt Relief Act will expire at years end, as scheduled.

Because foreclosure proceedings and short sales can be lengthy, drawn-out, agonizing affairs anyway, there are undoubtedly many thousands of distressed home owners who are desperately trying to complete a short sale or hoping to conclude a foreclosure before new years eve rolls around. If they don’t, they are risking a fat tax bill from Uncle Sam for the taxes owed on the debt that has been forgiven. The heat is on to get a deal done before years end.

For real estate investors this represents an unusual and brief window of time in which those who wish to sell a home quickly will be more highly motivated than ever. It’s going to be an unusual two months for those investors who focus on buying single family homes through creative means such as short sales.

And short sale investors take note – it also may mean your-days-are-numbered, at least in the short term. While I’d expect to see a huge uptick in short sales between now and the end of the year, they may also drop off to virtually zero for a month or two afterward, maybe longer, as sellers try to determine whether or not they can afford to sell and pay a hefty tax bill.

Real estate agents should be mindful that any active short sales have to be completed now, not later. This means you may need to be more flexible than usual and help your sellers get a deal done even if this means taking a commission cut, (the banks will hit you up anyway), and get the home sold to an investor who can pay cash and close quickly. We’re out of time for those 6 month affairs where you don’t hear from the bank for two months at a time. Something has gotta happen now. Don’t leave your clients owing a big tax bill just because you aren’t used to working with investors. It’s time to “give up the ghost” as we like to say in the south.

If you are a distressed seller, and your home is in danger of foreclosure, but you are not currently under contract to sell, and you have no offers on the table, it may be time to plan your exit strategy. Should you walk away before year’s end? Perhaps. It depends on your specific situation, and whether you would actually owe taxes if the MDR Act should expire with you still in a distressed situation. It’s a tough call, but the only thing worse than a foreclosure or short sale is owing taxes on a foreclosure or short sale. That will just add insult to injury.

So, unless congress suddenly puts all this to rest, I think this situation will force more distressed sellers to become highly motivated to sell to anyone at any price or terms that will get them out from under a looming tax bill. We’ll see more abandoned homes in the short term, more creative investment activity, then, on new years, it may all come to a grinding halt while all sides figure out what they’ll do next. In the meantime, it could be a very unusual and unique opportunity for real estate investors who specialize in single family homes.
——————————————————————————————————————————–
Donna S. Robinson is a real estate investor, author and residential market analyst located in Atlanta, GA. Follow her on twitter at donnaconsults. Her latest book, Basics Of Real Estate Investing is now available on Amazon.

Image/freedigitalphotos.net

A completed short sale will not show up on your credit report as a foreclosure action.  Instead it will most likely appear as a debt settled for less than was owed. This is a much less drastic effect on your credit rating.  Yes it will impact your credit score and will hurt you but it is a short term hit and you will recover from it relatively quickly.  Normally within 24-36 months your credit rating will have rebounded to the point where obtaining loans and financing will no longer be an issue, assuming you have made all of your payments and kept your credit clean since the completion of your short sale.

But there is even more incentive now to do a short sale rather than a foreclosure.  In December of 2009, FHA (Federal Housing Administration) announced if you sold your home as a short sale you could immediately qualify to buy another home with a 3.5% down FHA loan so long as:

1. The home you short sold was financed with a non-recourse loan.  A non-recourse loan is one where the lender cannot come after you for a deficiency judgment if they foreclose on the property.  Their only recourse is to take the property back.
2. The home you short sold was your primary residence and you can show that the hardship you were under in trying to keep that loan either no longer exists or the payment on this new loan will be significantly less and therefore more affordable.
3. You were not late on your mortgage payments at the time of the short sale.
4. You did not short sale your house as part of a strategic default just to take advantage of market conditions.  (You didn’t walk away from the house even though you could have kept it but it didn’t make sense to keep paying on it because its value had dropped so much.)

Now number three is normally the one that can keep people from qualifying for this program.  After all, the reason you short sale your home is because you can no longer afford the payments.  But, here is a little known trick if you are worried about getting a loan after a short sale.

If you approach your lender for a loan modification before you go into default and they agree to lower your payments for a period of time, then so long as you continue to make those agreed upon lower payments you are not in default as far as FHA is concerned.  You are still abiding by the new, modified terms of your loan given to you by your lender.  Then you can still decide to short sale your home down the road and be able to get a loan with no waiting period from FHA under this program.

But even if this new FHA program doesn’t work for you, the benefits of a short sale over a foreclosure when it comes time to buy a new home are significant.  You normally have to wait up to three years to qualify for a new loan.  But HUD regulations allow lenders to make exceptions to this three year waiting period.  For instance if your default was due to illness or death of a spouse which impacted your income.

Having to make the decision to give up your home is never easy.  There are always going to be certain consequences to deal with.  But using a short sale minimizes those consequences and gives you the best chance to get back on your feet and rebuild your life immediately.

Daniel Doran is a 20+ year veteran in the real estate industry. He is a previous owner of a law firm, mortgage and title company. Daniel has also written several books on mortgage modification, short sales and real estate investing. He currently specializes in Commercial Finance and Real Estate Development and is a graduate of Manhattanville College and Brooklyn Law School. You can contact Dan at Buildings By Owner.

© Andy Dean – Fotolia.com

A short sale simply means “selling short of what is owed on the note”. When a bank agrees to short sell a home they are agreeing to accept less than what is owed on the loan balance.

Short sales used to be very rare. Prior to the housing market crash, they were almost unheard of. But in the past two years, banks have really stepped up approvals of short sales to help move the backlog of foreclosed homes.

This is currently a very popular buying strategy for real estate investors, because fundamentally, the large inventory of foreclosed homes combined with a very high percentage of delinquent home owners in danger of foreclosure has forced the banks to sell more homes this way.

For investors looking for cash flow or cash profit on a resale, a short sale is currently the only way to add real equity to a property that is worth less than is owed on the mortgage. In short, investors and savvy buyers can use short sales to create equity where there is none. But relative to other strategies like holding rentals for income, the window of opportunity is relatively short. And once the mortgage forgiveness debt relief act expires at the end of 2012, this strategy could see drastic reductions in home owner participation.

From the point of view of the banks and home owners, short sales are currently a hot selling strategy, because of the ability to create equity. A bank that is willing to approve short sales can move a lot of properties at present, even though housing sales are still near the record lows. With home prices barely edging upward in most cities, short sales are a necessary strategy for sellers at this point in time.

According to Realty Trac, about 34% of all home sales in 2012 have been short sales. This is an unprecedented number that will not last more than a few more months if the market continues to pick up. And the expiration of the tax exemption is looming large. Given the long time frames involved in getting short sales approved by the bank(s) involved, sellers are quickly running out of time.

However, barring any big recovery in housing, short sales will continue at higher than normal levels until the market sees a true increase in end-user, owner occupant buyers. Investors are buying lots of homes and driving up the sales numbers and price statistics somewhat, but they are not end users. An end user tenant or buyer is still needed to get the housing market back on a stable growth track. That won’t happen until job growth really takes hold.

Buyers need reliable proof of funds to close short sales successfully. Yes it is possible to “flip” short sales at a profit if you are an experienced investor. Since you are dealing directly with banks and lenders, you’ll be expected to be able to prove that you have access to funds to close the deal as part of the approval process.

As noted above, market fundamentals such as unemployment and high foreclosure rates are supporting the high percentages of short sales activity. But short sales are not really impacted so much by property fundamentals such as location and condition. At present we have a rare set of market fundamentals in play that have combined to make short sales one of the hottest buying and selling strategies around, at least for the time being.
————————————————————————————————————–
Donna S. Robinson is a real estate market analyst, investor, author and speaker located in Atlanta, GA. Follow her on twitter at donnaconsults and read her blog on her website at www.realtybizconsulting.com

A foreclosure by any other name © steheap – Fotolia.com

This is being widely reported as “an opportunity for a home owner to avoid foreclosure and stay in their home”.

But this is something of a misnomer. Whether the foreclosure takes place through ordinary channels or the homeowner agrees to give the deed back to the bank, the same exact thing is taking place. The bank is taking back the title to the property, just as they would with a foreclosure.

In other words, borrowers who are agreeing to a “deed in lieu” are still losing the title to their home. If they participate in a rental program they are not “staying in THEIR home”, they are now a tenant with nothing more than a lease, and a rent payment. Let’s be clear here, this is not a way to “save your home”.

Yes it may allow the occupant of a property to remain in that property and avoid moving, but as far as the home owner is concerned, legally, it’s no longer “your house”. No more worries about maintenance or upkeep. That’s now the landlords responsibility.

I’m not even so sure that this makes sense for the banks either. Tenants are not an inherently better risk than an owner-occupant buyer, and managing rental houses in large numbers is not something that banks are equipped to do. If they can’t manage to keep up with foreclosure or short sale paperwork, or even advise a borrower on the status of a loan modification request, why should we assume that they will be good rental property managers? And the home could them be resold to another investor or investment company, creating further complications for the owner turned tenant.

The general media is reporting this as some kind of new program that is of benefit to home owners who are in danger of foreclosure, but a “deed-in-lieu-of-foreclosure” is really more of a help to the bank, as it allows the banks avoid thousands of dollars in legal fees and other costs related to pursuing a foreclosure – especially if the property is in a state that requires a judicial order to auction the property. Handing a bank a “deed-in-lieu” is basically handing them a free foreclosure.

The thing that puzzles me is why a bank or note owner is unwilling to modify a borrowers mortgage and make that mortgage payment more affordable, but they are more than willing to take back the title and then rent the property back to the same person at a lower, more affordable rent payment. Why not modify and let the owner keep their home, instead of turning the housing market into the worlds largest inventory of rental homes?

It seems to me that if the banks are willing to accept a lower rent payment, they’d be better off to avoid the hassles and costs of property management and just reduce the existing payments on the mortgage, even if only for a limited period of time.

I’m not really speaking of writing down the principal, but simply reducing the payment and keeping a home owner in their home as an OWNER, not a tenant. After all, when renting, one never pays off the home. Reducing mortgage payments to make them equally affordable might mean more years on the mortgage term, but at least the borrower has a fighting chance to get caught up and might be able to make additional principal payments in the future. But a program to convert owners into renters won’t be helpful for home values. It will however, help banks reduce the costs of foreclosure.

If you are a home owner who is in danger of default, and your bank is offering you a “deed-in-lieu-of-foreclosure”, think about it carefully before you agree. How much will your rent be? Can you afford the new rent payment? Do you realize that you are actually doing the bank a favor? After all, banks are not famous for doing things to help their customers. When it comes to the double speak idea of “staying in “your” home”, think twice before you take advantage of this “opportunity”.
——————————————————————————————-
Donna S. Robinson is a real estate investor and investing consultant in Atlanta, GA. You may follow her on twitter at donnaconsults.