The Importance of Understanding Foreclosure Options

In order to be a successful real estate investor you must understand your market inside and out.  If your market niche is foreclosures, then not only must you know the many options that sellers have, you must be able to portray those options to present a win-win situation during the negotiation process.  As a real estate investor, you should already know that when sellers are facing a major financial crisis like a foreclosure, they just want you to solve their problem.  Keep in mind however, that the manner in which this is accomplished varies greatly. 


There are many options that sellers may consider when they are facing a foreclosure or default situation.  Before you have even arrived to solve their problem, they may have considered a repayment plan, loan modification or forbearance agreement.  They may also have considered a deed-in-lieu, which gives the homeowner a release from their mortgage obligations in exchange for deeded collateral.  If they are unaware of these options, it is in your best interest to explain each one to them.  You will win some and you will lose some deals by being an honest investor, but that’s ok.  Homeowners will not trust you if they get the feeling that you are just out to make a quick buck from their misfortune. 


In any case, if none of these options will work for them and a cash sale is not a viable option due to time restraints or market turmoil, then this is the time to explain the benefits of a short sale.  A short sale is a win-win situation for the real estate investor and the homeowner in many cases. And while a short sale will not bring any cash to the homeowner, it does save their credit substantially and allows the investor to get their hands on a piece of property for under market value.    

Category: Foreclosure

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