How Long After Foreclosure Can I Purchase a Home – Will Tomorrow Be Okay?

Losing a home is one of the biggest financial disasters that a family will experience. Getting over that, you have to move on to what’s next? Let’s answer the question: how long after foreclosure can I purchase a home?

The Answer…

It is literally possible, to purchase a new home for your family the same day that you have to move out of your foreclosed home. I know that this can sneak by as some good news amidst all the bad news that you have been going through.

If I were you right about now, I would be thinking that there is no way that I will be able to qualify for another loan to purchase another home. What if I told you that with this process that you don’t have to qualify for a loan?

All the things that come with foreclosure, such as damaged credit and stained reputation, will be eliminated with the way that you are going to purchase this new home for you and your family.

The Method…

Average folks do not realize that there are millions of homes sold each and every year that have no mortgage lenders involved. We have all been told that you have to qualify for a mortgage to own a home. Not True!

Savvy real estate investors all over the country rely upon what is termed in the industry as creative real estate investing. This just means using other people’s money. Sounds a little scary if nothing else. That is exactly what a mortgage is. And no, you do not have to borrow from relatives or have a lot of cash of your own.

We are going to use a technique right out of their playbook known as a lease with the option to purchase. This powerful and very successful transaction will put you right back into home ownership as soon as the paperwork is signed. And yes, you will be the legal owner!

Some Benefits…

The real beauty of this is the fact that you are going to set the actual terms of the purchase. If you come across a deal that you do not like, you merely reject it and go on to the next one.

If you have ever searched for an apartment to live in, this process is about the same, with the exception that you are looking to own instead of just renting. Yes, it is that easy!

You will be amazed as to how quickly this can be accomplished if you are serious about owning your own home. How can I be so sure? That’s an easy one – I have done hundreds of these.

Foreclosure Laws in Nevada

Nevada allows both judicial in court or non judicial out of court foreclosures. As with all states in which both methods may be followed, the determining factor as to which method will be used is the existence of power of sale. If the deed of trust or mortgage contains a power of sale clause, this allows the bank to pursue foreclosure without petitioning the court to do so. Most deeds of trust or mortgages do contain a power of sale clause. This benefits the bank. This also means that most foreclosures are done non judicially or out of court. This is because it saves the bank both time and money to proceed this way.

If a power of sale clause is not written into the deed of trust or the mortgage of the home in question, then judicial or in court foreclosure must be followed. This process begins with the bank filing a lawsuit against the home owner who is having difficulty paying his mortgage. The bank does this to obtain a court order to foreclose. Once this court order to foreclose is obtained, the process of moving toward the sale of the home is the same as in non judicial foreclosure. The homeowner does receive a twelve month right of redemption when the judicial method of foreclosure is used. In this type of foreclosure, for the twelve months following the sale of the home at auction the person that lost their home at the sale can regain ownership of the house.

When a power of sale clause contains specific instructions as to when, where, and how the sale of the home is to take place, then those specifications must be followed. Most of the time, power of sale clauses are not so detailed, and the usual method of moving toward the sale date is followed.

The first step of that process is that a copy of the notice of default and election to sell the property is sent to the homeowner. This letter must be sent by certified return requested mail, to the last known address of the homeowner. This letter is to be mailed the same day it is recorded with the county in which the property is located.

The time line from the notice of sale to the actual auction of the house is usually one hundred and twenty days in Nevada. The scheduled sale date cannot be sooner than three months after the date the notice of default and election to sell is recorded with the county and mailed to the homeowner. The notice of default itself, specifies the time, date, and place the sale is to be held.

The process of curing the default, should the homeowner desire to do so, must be taken care of during the first thirty five days following the issuance of the notice of default and election to sell. This is a way to stop foreclosure. If the homeowner wants to do this, they must file a notice of intent to cure, no later than fifteen days prior to the scheduled sale date. The money required to cure the fault and stop the foreclosure sale will be the amount needed to bring the loan current. This dollar amount must be paid before noon the day before the scheduled auction of the home. If the homeowner does not come up with that money by that time, the sale will proceed as scheduled. The notice of default and election to sell will contain all the information about the sale; where and when it will occur. Most often, the beginning bid or the amount required to participate as a bidder on the home will be the amount of the first mortgage plus the fees and costs and interest the bank has incurred.

Being that most homes going to auction these days have very little if any equity in them, this opening virtually always too high for investors to take any interest in the home. This means that at most sales the property is taken back by the bank. This causes a lot of problems for the lender.

If the home is sold at auction for less than is owed on the loan, the bank has the right to seek the difference between what the sale generated and what they were owed from the former home owner. The bank can exercise this option for three months following the sale. After this amount of time, they can no longer seek that money. This is called a deficiency judgment. Most people who lose their home to a foreclosure sale do not have any other assets worth pursuing by the bank. The banks realize that it is a waste of time to try and get blood from a stone in these cases. So, unless the bank has reason to believe that the former homeowner has other properties worth equity or other assets they could take they will most likely not seek a deficiency judgment. To do so would just be flushing money and time down the drain.

Foreclosure Woes

If your mortgage is at a very large bank, you have made a mistake! Trying to work out a solution to your deficiency is very complicated and the service is lousy. Your foreclosure woes have begun!

A friend was delinquent with her mortgage payments. She had owned her property for 37 years. The bank filed the papers to put the property in receivership (foreclosure action) to the bank. The friend immediately phoned the bank to see if there was anything she could do. She worked out a plan with the bank to reduce her payments and followed through for 13 months of on-time, full, adjusted payments. When she attempted to make the 14th payment, the bank returned it.

One day, she received a notice that her home was scheduled for a “Sheriff’s Sale.” Puzzled by the notice, she immediately phoned the bank and was told that they did not need to file any more legal papers, since they had previously filed the necessary papers (before she made the arrangements) and the application for Obama mortgage assistance had been rejected. What this means is that the deficit, the difference between payments under existing mortgage and the adjusted payments while the Obama mortgage assistance modification application was awaiting approval or rejection, was due in full when the application was rejected. Example: Payment under existing mortgage, $1100; payment under Obama mortgage assistance, $700. Rejection would mean $400 X 13 or $5,200 would be due immediately and there could be fees attached. During the 13 months, no statement showing her account was ever provided by the bank. She was advised that when a mortgage is in default, the bank has no legal obligation to provide a statement of the account.

The bank purchased the property at the “Sheriff’s Sale”. Did you know that following a “Sheriff’s Sale” and confirmation of the sale, the bank (buyer) only must give you 48 hours to vacate? Furthermore, you will have all these strangers entering your property to complete various tasks on behalf of the lender/buyer (the bank).

People all around me are losing their homes due to foreclosure. It is almost a repeat of the Great Depression. The exception is that in the Great Depression, saved money placed with banks was also lost. Today, bank accounts are insured by the FDIC.

What brought this dilemma on? My thoughts on this are that credit was “too easy”! On the lender side, banks and mortgage companies were willing to be liable for too much mortgage. On the buyer side, a lack of concern and understanding of how much debt was being taken on. No one planned on losing a job or other circumstances, not being able to meet those mortgage payments. You always want the lowest payment possible at the lowest interest rate. I personally experienced this. When times are tough, you need to work closely with your lender. In 1946, a family member, who owned with a mortgage loan, sometimes only made the interest payment of the mortgage due to hardship. They did not lose their property but many years later, paid it off. Could this be a solution to the present day foreclosure woes?

The Obama Making Home Affordable program (loan modification program) is a complete disaster. Those who really need the help are not getting it. A recent conversation with my banker revealed the seminars attended by the financial employees of mortgage lending institutions left them with a big blank trying to understand what the heck it is supposed to do. The mortgage lending firms are less than helpful to the customers who have or will be very shortly losing their homes. One application was returned reject because the owner’s income was too low. Isn’t that what a loan modification should be considering when reviewing need? Very few people have been approved under the Making Home Affordable program.

If you are having a problem making your mortgage loan payments, the best thing you can do is visit your lender in person and suggest that maybe you could just pay the interest on the loan for a period of time.

Obviously, not being able to pay your mortgage payment is a very serious situation and should be avoided at all costs, even to the point of putting the property up for sale. You will not see a penny of your equity should you allow your lender to foreclose. It is also very important that your mortgage lender is local.

Be Aware of Foreclosure Scams

Unfortunately, whenever you are dealing with money, there is always a scam artist on the prowl. This is true when dealing with the foreclosure process. These people try to take advantage of your financial troubles by offering solutions that sound to easy or too good to be true. Here are some scams you want to look out for.

o Watch out for equity skimming. Equity skimming is when a so called buyer contacts you and makes an offer to buy your property out or give you money when the property is sold. The so called buyer will ask you to move out and deed property to them. Then they try to either resell or rent the property out. Guess what? They are collecting rent, not paying your mortgage and allow the lender to foreclose. Meanwhile, you are still obligated to pay your mortgage.

o The three main foreclosure fraud categories according to the National Consumer Law Center and Bankrate.com:

o Phantom Help: The “rescuer” charges outrages fees for light duty phone calls and paperwork that you can easily do. None of these actions will save your property. This scam gives homeowners a false since of hope and prevents them from seeing qualified help.

o The Bailout: This is a scam when the “rescuer” has you sign over the title then informs you that you can still live in the house as a renter and eventually buy it back over time. Eventually, you will find out that the terms of this scam will make it impossible to buy-back the house. The “rescuer” walks off with the equity and you lose your property to foreclosure.

o The Bait-and-Switch: In this particular scam, the scam artist will have you sign documents to make your mortgage current. But, little do you know, you have actually signed over your ownership. You will not know you have done so until you get an eviction notice on your front door.

As you can see, there are many ways to get scammed in the foreclosure process. So make sure you sign documents you fully understand, get all promises in writing, make sure you have been formerly released of the mortgage debt, and keep in contact with your Mortgage Company and/or lawyer during the process It may also be good to do a background check on the prospective buyer of your property. Also, be very careful with e-mails offering deals to good to be true.

Foreclosure Real Estate Purchase Contract – What to Expect

A foreclosed home is one in which the home owner was unable to pay his home loan so that the lender took over home ownership through the foreclosure process. These bank owned properties are also known as REOs (real estate owned).

The process in Arizona is similar to that in other states and will be the basis for this article. When you work with a real estate agent he will write up your purchase offer with you on a standardized contract which was developed by the Arizona Association of Realtors. The contract allows the agent to customize the contract for your particular purchase and has many built in protections for both the buyer and the seller.

When you make an offer for a foreclosed property, you can expect to receive back from the seller (the bank currently owning the property) an addendum to the contract. These addendums are in essence a counter offer that the buyer must accept if he wants to purchase the property. In some cases the seller will negotiate with the buyer over these terms but most sellers expect the buyer to agree to their terms. We have seen a wide variety of addendums in the past year as we have worked with buyers. In all of them, many of the protections for the buyer in the standard contract are eliminated or modified. Here are some of the things we are seeing.

Inspection Period

In the standard contract, the inspection period lasts ten days from the date the contract has been signed by both parties. We have seen addendums that change that to be ten days from verbal acceptance of the contract and have even seen a five day inspection period that must be completed before the buyer signs and accepts the addendums.

Title/Escrow Company

The seller will typically require the buyer to utilize the escrow company of the seller’s choice. Usually using this company helps facilitate the timeliness of the transaction because the escrow company is familiar with the seller’s requirements.

AS/IS & Disclosures

When you purchase an owner occupied property, you will usually get a Seller’s Disclosure Statement. This will provide information about the property and a history of repairs done. When you buy a foreclosure property, the seller has not occupied the property and typically will not provide any disclosure statements. Additionally, the buyer is generally required to purchase the property in its current condition “as is” and the seller will not make any repairs. If something is missing such as a kitchen appliance or garage door openers the seller will not provide it. What you see is what you get. Read the addendum carefully to understand what the seller will be responsible for if the property is damaged during the escrow period. The escrow period spans the time from when the contract is agreed upon by both parties until the sale records (close of escrow).

Cost for Extension of Close of Escrow

Most of these addenda have a per diem charge if you need to extend the close of escrow beyond the date in the original contract. The most common reason buyers need to ask for an extension of the closing date is that the lender has not completed loan processing and delivered loan documents to title several days prior to closing to allow time for both the seller and the buyer to sign. We have seen costs ranging from $40 to $100 per day.

Loan Approval

The Arizona contract allows for a return of earnest money deposited by the buyer if after a good faith attempt to obtain a loan at prevailing market rates to purchase the property the buyer is unable to do so. Some addendums are limiting the buyer’s time to obtain loan approval to a set number of days from contract acceptance, for example 25 days. If the buyer does not notify the seller of his inability to obtain a loan within that time frame, he will forfeit his earnest money to the seller. This holds true even if the inability to obtain the loan had nothing to do with the buyer’s financial qualifications. We have seen loans turned down in the past few months for condo purchases because the community had too low a percentage of owner occupied units or the HOA was not financially solid or some cases for both of these reasons.

Tenants or Other Occupants

Most of these properties will be vacant; however, if you see evidence that someone is living in the property when you are viewing it and prior to writing an offer, you need to ask questions. Who is living in the property? If the property has been rented, what are the terms of the lease? We’ve seen addenda that indicate that the seller will not evict any occupants of the property and that it will be the responsibility or the buyer once he has purchased the property. You should also be aware that tenants have rights too. Be very cautious about writing an offer for a foreclosure property that is occupied.

What Does the Buyer Need to Do?

It is very important for the buyer to read the entire addendum provided by the seller prior to signing. If he has questions about the addendum he should ask his real estate agent for clarification. He should also verify that his real estate agent has read the entire addendum and made note of key dates.