Help for Owners of Foreclosed Properties

An article in Wednesday’s Washington Post reports some very encouraging news. The Neighborhood Assistance Corporation of America (NACA), a housing advocacy group, has raised $1 billion to help refinance the mortgages held by thousands of lower-income people who are at risk of losing their homes. The funding has been secured by CitiGroup and the Bank of America. My hat goes off to NACA and its backers in this initiative.

Still, it remains to be seen how far that $1 billion will go to combat a wave of foreclosures that yesterday's Home News Tribune describes as a “tsunami” in the state of New Jersey alone.

These are troubling times for many overextended homeowners. And property investors don’t have a very easy time either. It is a great time to buy foreclosed or soon-to-be-foreclosed properties. But who would want to take advantage of a family that is about to lose its home?

At least, that is the way many investors are thinking. Yet investing in foreclosures doesn’t necessarily mean taking advantage of disadvantaged people.

First, many foreclosures don’t result from economic hardship. According to different sources, between 2.5 and 4.5 percent of foreclosures result from divorces. There are also many commercial-property foreclosures that occur when owners simply walk away. There are also foreclosures that result when the owner of a property dies without heirs - or when heirs decide to let the mortgage-holder foreclose on a house. So the point is, you can look at the stories behind foreclosed properties - and there are many stories that have nothing to do with a family losing its home.

You can structure purchases to benefit the former owners. You can purchase a soon-to-be-foreclosed house and lease it back to its former owners. If the numbers work, you might be able to offer them a rent-to-buy arrangement that benefits both of you. Bear in mind that banks generally try everything they can to allow current holders of residential mortgages to remain in their homes - offering to extend the period of the loan to reduce monthly payments, for example, or offering other options. By the time a property is actually foreclosed, the bank has usually attempted to apply such remedies, and they have not worked.

The coming months will be challenging for homeowners, investors and developers. But people in all those categories can be safe if they understand the foreclosure trend and how to take advantage of it. If you want to get on the inside track to making significant money in this unstable market, take part in one of our Foreclosure and Rehab Real Estate Retreats. Click here to take a look. It could be the most important wealth-building step you ever take.