By: Ramon BermudezNo one likes to think about disasters. Severe weather, fire, theft—or even a seemingly small issue like a broken pipe—can wreak havoc on your home and result in
Know Your Options When Facing Foreclosure
By: Ramon Bermudez
If you are facing unfortunate circumstances and are facing foreclosure, chances are you have received countless letters from investors and have even had some knock on your door offering to buy your house CASH! You’ve probably asked yourself, “What should I do?” Many sellers are overwhelmed by the circumstances that got them in a tough spot to begin with; The countless offers, investors, and door knockers may be just too much to handle.
Know your options!
Believe it or not, you have many options that you just may not have thought of in your distress. While selling your property may ultimately end up being the best option, not all sales are the same.
You may have investors or wholesalers offer to take your property “Subject-To”. What this means for you is that the buyer will take over your payments. While this may sound like an attractive option, seller beware; While the buyer will indeed take over your payments, you as the original mortgagee are still liable for the balance despite no longer being the owner of the property. In short, this is a form of owner financing.
Most experienced investors are ethical and moral, however as with anything there are bad apples in the bunch. A risk you run by selling subject-to without properly vetting the buyer is them simply not making the payments. As I mentioned, you are still liable for the note. Therefore, if they default on the loan, YOU are defaulting on the loan.
The entire reason you decided to go this route is to avoid foreclosure and all of a sudden you are in a worse situation with much less control. While you may be in distress, you should not allow the investor to steer you in a direction that is uncomfortable. Hire a loan servicer that will protect you and the investor by ensuring that all payments are made and made on time.
Selling Sub-to also has potential ramifications for you down the road should you be able to purchase another home or take out a loan. Being that you are still liable for the note, this debt will continue to show on your credit until the note is paid off or refinanced. The buyer typically has no incentive to refinance, therefore you could be holding that debt on your credit for countless years with no real remedy.
Subject-To could be a great option for a homeowner in distress, however the downside could be potentially disastrous.
What in the world does “and/or assigns” mean?
When a buyer places “and/or assigns” into a contract, they are letting you know that they may purchase the property or they may sell the contract to someone else as an assignment of contract.
While there are experienced investors that use “and/or assigns” in their purchase contracts, most investors that use this are typically not interested in purchasing your house.
Worse yet, they are incredibly inexperienced in these complex transactions. I strongly advise you to thoroughly vet the buyer and ensure they have funds to purchase the property. It is OKAY and in your best interest to ask them for a pre-approval letter, Proof of Funds letter, and/or bank statements showing the available funds to purchase your property.
In my time in this industry, I have seen inexperienced investors lock up properties under contract, shop the contract around, and not have the ability to purchase the house. In a situation of distress, time is money. If foreclosure is right around the corner, you need a buyer that will fulfill their end of the contract and not leave you holding the bag with days to remedy an impending foreclosure.
A short sale is a great option for a homeowner that just needs out of a bad situation or is upside down on their current loan. While a wholesaler or rookie investor may walk into your house and tell you the most you will get is an offer way below the mortgage payoff, I have found that most times a seller can get quite a bit more; At times, even satisfying the entire loan balance.
We have discovered that professional investment groups can offer substantially more than a loan wolf or rookie investor, due to their high-efficiency systems and in-house investment teams. On a recent short sale our team processed, a loan wolf/rookie investor had a property under contract for $48,000 LESS THAN the final selling price.
Once our team began to represent the seller and float the property to those professional investment groups we were able to do extraordinary work for our seller. With that $48,000, the seller was able to walk away with some cash in their pocket, a fully satisfied loan balance, and no derogatory marks on their credit history.
While other realty groups and brokerages look out for their investors, our team prides itself on doing what is right for the seller, rather than what is right for the buyer.
A short sale can be a long, difficult process for sellers and their agents. Our team is here to use our expertise to make it as smooth and seamless as possible. If sellers and agents become partners in the process, it increases the likelihood of final short sale approval.
Many people settle for the door knocker or yellow letter cash offer thinking they have no better option. Please don’t allow these door knocking rookies to use your distress to their advantage. OUR TEAM HAS MANY TOOLS IN OUR BELT TO HELP YOU GET OUT OF AN UNFORTUNATE SITUATION!
What most people don’t know is that these door knockers are inexperienced investors that ONLY have one tool in their arsenal. Worse yet, they will use your distress as their learning curve. Don’t allow that to leave you in a precarious situation as time frames begin to collapse.
As an Investor/Agent, I have created many lasting relationships with other investors, agents, and experienced investment companies that pride themselves on doing business in an ethical manner. If you are ever in a difficult situation contact a group that understands the Real Estate Investment world and can answer any question that you may have in regards to selling to an investor. Our team would be happy to guide you through storm of offers and investors coming your way to ensure you make the best decision for you and your family.
Ramon has an extensive background in Real Estate and client relationships. He was born and raised in Mansfield. Ramon is formerly an Acquisitions Coordinator with two different large real estate inves....
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