In some circumstances, preforeclosure buyers may be able to simply take over the monthly mortgage payments and have a workable plan for catching up with past due amounts.
Especially in a time of increasing foreclosure rates, lenders are very motivated to avoid adding to the inventory. They might be willing to forgive some past due interest, reverse late charges, and split the difference on legal fees and other expenses.
If they would do this with you, why would they not do it with the borrower? Because the borrower is probably too frightened and emotional to talk to the lender, and because the borrower is now tainted in the lender’s mind. The lender needs a fresh face, someone with a good credit score, to take over the payments. That could be you.
Auction buyers will have to check with the attorney or trustee in charge of the sale. Sometimes bidders must register by depositing earnest money with the auctioneer in order to show the financial ability to proceed to closing. Other times you must pay a certain percentage, from 5% to 20% on the day of the closing, with the balance due in thirty to sixty days. The requirements vary among states, lenders, and auctioneers.
Postforeclosure cash requirements are very much like buying any other real estate. There is a lot of worry in Washington, D.C., and on Wall Street about increasing numbers of foreclosures and their impact on the economy. One aspect of the problem is the issue of lenders and investors holding large inventories of foreclosed real estate.
We predict that these groups will become much more motivated to engage in creative solutions, including holding 100% of the financing for sales of foreclosed real estate. Regulatory and accounting barriers that currently make this very difficult may have already been removed by the time this book reaches your hands.
Always ask if the owner of foreclosed real estate will finance your purchase for 100% of the purchase price and waive all closing costs. Be prepared to pay a higher purchase price than if you had cash.
For other types of foreclosure-like sales, such as tax auctions, creditor sales, or bankruptcy sales, you should ask whoever is conducting the sale about his or her cash requirements. These can vary widely.