Kansas City North Real Estate Blog

This Month in Real Estate News

What's a Pre-Foreclosure?

What are Pre-Foreclosures?

Pre-Foreclosure is the term used for homes that have been scheduled for a foreclosure sale but have not yet gone to auction or been sold off. Often times this period of time can range from anywhere from a month to a year, depending on the customs and laws of the state or county. Just because they have not yet been sold off does not mean they cannot be purchased, as many home owners look to sell their home before a foreclosure sale takes place.

How Preforeclosures Begin

The process of foreclosure begins when a homeowner defaults on their loan. Generally when this occurs, the lender involved will issue the homeowner a notice of default, and for all intents and purposes this begins the preforeclosure period. From here on out many things may happen—the homeowner may raise the money to pay off their default debt to the bank or lender and stay in their home, the lender issues a Notice of Sale and arranges to put the property up for sale at a later date, or the homeowner finds someone willing to buy their home and avoids a foreclosure sale. This last option is becoming increasingly common, as investors and home buyers alike often look to find great homes for sale at extremely low prices through the preforeclosure market.

Low Prices on Pre Foreclosure Homes

Buying or investing in preforeclosure homes can be extremely lucrative, because often times a homeowner will be willing to sell off real estate in danger of foreclosure for very low prices simply to avoid a foreclosure sale. Many buyers end up finding deals of anywhere up to 50% off the true market value of a property.

Finding the Right Pre-Foreclosures

Since real estate sold by agents and brokers dominate the market, it can be hard to find properties available through this means. A good idea is to consult a pre-foreclosure specialist to find property available in your area, as well as information on how to go about purchasing these valuable properties.

If you have questions about buying a pre-foreclosure home in the Greater Kansas City area, please contact Ron Henderson at 816-651-9001 for more information.

Divorce and Real Estate

Divorce is certainly difficult enough on it's own, but when there's a home involved it can be even more complicated. Obviously if one party can afford to stay in the home, this can be an option, but many times neither party can afford to keep the home by themselves. Also, they may not want to stay in the home with all the "memories".

If you have enough equity in the home to get it sold, then that's probably the best option. If that's just not possible, there are actually several options available given this situation and each of them carries their own good and bad issues.

Short Sale:

A short sale can be an option when each party is not financially able to afford the home on their own and the home is over-leveraged.  For example, if the outstanding mortgage balance is $300,000, but your home will only currently appraise for $275,000 you will suffer a $25,000 loss if you accept the offer (actually it's much more than that with closing costs and Realtor commissions).

http://In today’s economy and due to the Real Estate crisis there are many lenders who will accept such a deal and allow you to do a “short sale.” The reason for this is they fear both parties will simply move out of the home and allow it to go into foreclosure. Too many times, when this happens the lender will lose much more money than what they stand to lose in a short sale.

Be sure though that you talk to a Realtor that has experience doing short sales in your area. Choose an inexperienced agent and it can cost you big.

Negotiated Ownership:

You can also use the house as a negotiating tool during the divorce process and divorce settlement negotiations. If your spouse has an interest in remaining in the home, he/she could refinance and buy you out of your interest in the home.

For example, if you want spousal support but the house is putting you both in a financial bind, you can offer a buy out in place of the spousal support you desire. In such a situation, you receive a lump sum of money, your spouse receives the home and you both get what you want. Of course, this solution only works if there is equity in the home.

Rent the Home and Sell At A Later Date:

You and your spouse could rent the home until such a times as the real estate market improves. This is easily negotiated in a divorce settlement agreement. You want to be careful to cover all your bases and make sure every contingency is covered.

You and your spouse would agree to who pays the mortgage or how the mortgage payment will be split. There should be wording in the divorce settlement agreement that covers who is responsible for what maintenance on the home.

The agreement should also specify a date the home is to be placed on the market. How the listing price will be determined, what Real Estate agent will handle the sale and how any profit from the home is divided. Waiting until a later date to sell allows you to protect the investment the two of you have in the marital home because the Real Estate market will eventually turn around. When it does you will be in a better position to get a return on your investment.

If you have any questions about this or would just like some advise, feel free to call Ron Henderson, Keller Williams Realty at (816) 651-9001