Ask Paul Wells

What are the homeowner in foreclosure options and what do you say when you explain the options to them? Jonny

Here is one of the key strategies that you need to know and use when working with people in foreclosure and that is to be able to explain the options available to them. I do want to give you a word of warning though. PLEASE know and understand the laws of your state in regards to offering consultation and assistance to those in foreclosure. In our state of Colorado one cannot offer foreclosure consultations and act as a consultant then take title to the property. What my suggestion would be is to make it very clear that you are an investor that purchases homes in distress before you begin to share options.

The options available to those facing foreclosure and how you can help them with your expertise are varied. The first option is for the homeowner to make up their missed payments. Now let’s get real because if they could do that they would have. So what are the other options available.

#1-A Forbearance Agreement. This is really a payment arrangement with the lender where the homeowner is allowed to temporarily stay (stop) the foreclosure by making up the back payments as well as their regularly scheduled in a negotiated payment agreement with their lender.

#2-Deed in Lieu Of Foreclosure. This is simply the lender agreeing to take the deed to the house, and the house as well, and agree to stop the foreclosure in exchange for that deed. Generally the only time a lender will agree to this solution is when there is sufficient equity in the house make financial sense for the lender to take the house back and then resell it to recoup the money owed on the property

#3-A Short Sale, The homeowner in foreclosure can work with you the investor who will in conjunction with the bank will try to arrange a “SHORT SALE”. This is a solution that requires the bank to take less then what is owed on the note that is currently attached to the property. The bank will sell the note that is in foreclosure in order to liquidate the property and get it off their books. Banks are in the business of loaning money on single family property, not owning it. A short sale is a great way to accomplish this.

#4-Do Nothing. Unfortunately this actually happens with some home owners. They will wait and wait and then they run out of time and lose the house to foreclosure.

So there are 3 options you can explain to the homeowner and a 4th that is not good for anyone.