The real estate foreclosure explosion continues to wreak its havoc upon consumers and corporations alike.
On the consumer side, we are seeing tighter restrictions on mortgage lending, which makes it harder to obtain a mortgage loan. This is one of the reasons I keep chiming in about keeping a good credit score ... it is the most important thing consumers can do when facing the financial uncertainty we are now facing.
On the corporate side, many of the same lending institutions that got us into this mess (by loaning money to people who had no business taking on a mortgage loan), have suffered meltdowns all their own. According to their website, Ameriquest is no longer accepting applications for home loans. And Bank of America recently announced it will buy Countrywide.
Goodbye subprime lending industry.
But isn't there any good news within all of this?
Sure, if you're a real estate investor with ready access to financing. As the number of home foreclosures rise, so too do the number of real estate short sales and auctions -- both prime investment opportunities for purchasing a home below market value.
By way of definition, a "short sale" is a real estate sale where the sale price is less than what the seller still owes to the lender (via the mortgage loan).
In other words, the seller will sell the home for less than what he or she owes to the lender, and the lender will agree to accept this amount from the homeowner and "forgive" the remainder still owed. That is the basic definition of a short sale in real estate terms.
Believe it or not, mortgage lenders do not want to foreclose on homes. It's a hassle for them. They are in the business of lending money -- not managing, marketing and selling properties. So the lender will often allow the seller to pursue a short sale just to get the property off their hands, and off their books.
Normally, the seller will work with a real estate agent who specializes in short sale techniques ... somebody who can get the word out quickly about the great investment opportunity, and thus sell the home much faster than through traditional sales methods.
So if you're a buyer looking for an opportunity to buy a home for less than market value, tracking short sales could be the method for you.
Tracking Short Sales and Foreclosures
In the previous paragraph, the word "tracking" probably caught your eye. Obviously, you have to know about homes entering the foreclosure process so that you can evaluate them from an investment standpoint. Thus you must track short sales and foreclosures in your area.
Currently, there are about a dozen web-based services that can help you track foreclosures and short sales anywhere in the United States. Basically, you sign up for the service, enter your target search area (city or cities), and the service will send you email notifications about foreclosures.
If you plan to use one of these services, I recommend you conduct a free trial with two or three of the leading providers, to see which one you like best.
Brandon Cornett is the publisher of Home Buying Institute. If you would like the author's personal recommendation on foreclosure tracking services, check out his guide to the real estate short sale and his tutorial on buying foreclosures. Learn more at http://www.homebuyinginstitute.com/buying-foreclosed-home.php
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