Foreclosed homes are regularly set on the market by the two major home lenders: government agencies and banks. Be they government foreclosures or bank foreclosures, what matters most is that they can be purchased at expenses lower than their real market value. This is why homebuyers or investors generally are in haste as soon as a reliable foreclosure opportunity is listed. After having investigated the real estate market and its potentialities, homebuyers must move quickly if they want to grasp this temporary chance. In what follows we will see some of the basics and advantages of opting either for government foreclosures or for bank foreclosures.

The most popular government agencies that frequently market foreclosure properties are as follows:
1) the U.S. Department of Housing and Urban Development (you are probably already familiar with HUD foreclosed homes);
2) the U.S. Department of Veteran Affairs (for the well-known VA foreclosures); 3) local agencies of taxation;
4) the Federal Deposit Insurance Corporation (FDIC – the department dealing with foreclosure sales);
5) the Internal Revenue Service (IRS – once again the segment dealing with foreclosures).
However, the market of government foreclosures is led by HUD foreclosures and VA foreclosures.

In any case, the point is that with government foreclosures one of the above mentioned government agencies is holder of the property’s title. As a rule, they will place any foreclosed property at auction. The buyer’s advantages are basically drawn from bidding opportunities generated by auction circumstances: the potential buyer’s chance to set a limit for the house value, the certainty over the time interval spent to acquire a property, the possibility to evade prolonged negotiations with the former homeowner. As with any auction, government foreclosures are purchased if the bidder’s offer is appropriate. Also, your involvement in government foreclosures auctions needs to be mediated by a certified real estate agent who is regularly rewarded a 6% bonus for having successfully sold the property. The real estate agent’s indemnity is an additional figure to the sum you place as a bid.

To what concerns bank foreclosures, there are three major ways of purchasing such properties. One of them is in pre-foreclosures. In this case, you will need to act promptly, because there is actually very little time up until a property in a pre-foreclosed stage is transferred to foreclosure terms. So before properties actually become bank foreclosures, the active, smart homebuyer/investor – who has previously undergone a serious investigation of an area’s real estate market – will know to move in the direction of negotiating directly with the distressed homeowners. If pre-foreclosure attempts fail, the next step is an auction.

With bank foreclosures, the auction is required by the banks whose lends haven’t been acquitted on time. In such circumstances, the homebuyer/investor could try to overpass the bank’s bidding offers. Yes, the bank will also bid in such auctions, interested in stepping further along the process of profitably selling foreclosures. If the auction is won by the bank, the property becomes an REO (real estate owned) foreclosure property. This is the third way in which you could purchase bank foreclosures. When you are interested in REOs, you will negotiate directly with the bank. The main advantage of the potential homebuyer/home investor is that this is the most certain manner (and one of the fastest) of acquiring a foreclosed property. You will need to make an offer, but be careful: the offer should be commonsensical, don’t expect a bank to accept a discount of 50%, even if we are talking about foreclosures. Most often, you will get a 10%-20% lower price for an REO foreclosure.

In the end, the key toward purchasing foreclosures, no matter the entity selling them, is given by two stages:
careful real estate market investigation and promptness in action when the time comes to place your offer.
Remember that the market of foreclosures, no matter how advantageous, is highly competitive, since many homebuyers/investors are interested in it.

About the author: The above Real Estate information on Buying Government Foreclosures or Bank Foreclosures: Basics was provided by William Henderson, a Florida Licensed Real Estate Agent with over 15 years in the Banking, Finance and Real Estate related fields. William can be reached by email at whenderson586@gmail.com or by phone at 786-346-5611. You can also check the website http://www.foreclosuredump.com for up to date properties for sale in your area.

 

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07.14.10 By Credit.com Staff

In an effort to find more affordable home prices, more Americans turned toward foreclosures during the first quarter of 2010, according to a new report. The study - conducted by foreclosure listing and information website Foreclosure Deals - reveals that 31 percent of home sales during the first three months of the year were for homes whose previous owners defaulted on their mortgage loans.

The total number of foreclosure home sales during the first quarter is 33 percent lower than those sold during the first three months of 2009. A combined total of 232,950 foreclosed homes were sold in January, February and March. Lower sales prices are one of prime reasons consumers turn toward a foreclosure, with the average price being 27 percent lower than a traditional home during the first quarter of 2010.

"Buyers are attracted to foreclosures because they offer tremendous discounts," Foreclosure Deals business analyst James Foxx said. "The numbers show that each year, the total number of foreclosures sold has increased, and that's not just a reflection of supply. They're very popular, and for good reason, there's no better investment value in real estate currently out there."

Statistics reveal that foreclosure home sales have increased by 320 percent overall since 2007.

Many lenders, such as Fannie Mae, have implemented programs and created help centers to assist borrowers and try to reduce the incidence of foreclosure. But as unemployment rates remain high and the backlog in repossessing foreclosed properties may be skewing the real amount of Americans who have defaulted on their mortgage, it is unlikely that recovery will come as quickly as many individuals hope.

It has been more than two years since Sandra Hines got shoved out of her family's home of 38 years, but her loss still feels fresh and raw. She remains proud of her northwest Detroit neighborhood. Its streets are lined with stately trees and dozens of modest brick and concrete houses like the one her family called home for a generation. Today, the two story house sits empty, but through the window a ladder and can of paint can be spotted in the living room -- signs that the new owner has been here working.

Hines, now in her mid 50s, looks inside and sees her lost future. "They were going to grow up," she says of her two nieces, "and this was going to be the house for them, from one generation to another... the one that was going to be passed down in the family."

Two years ago, Hines, her two sisters and a niece watched as bailiffs came to the house to throw out their belongings and padlock the doors. "I never imagined we'd be in this place," she told me through tears not long after the foreclosure. "I moved into that house when I was 18 years old. It was our base."

But the summer of 2007, the Hines took out an adjustable rate refinance loan from H&R Block, to do some repairs on the house. Like millions of other families, when their monthly payment began climbing after just three months, they could no longer keep up. They fell rapidly into default and just days before Christmas they were evicted, becoming one of 2.5 million foreclosures completed between 2007 and 2009. Some analysts predict another 10 to 13 million more will begin the foreclosure process before the crisis ends.

The Applied Research Center, which publishes ColorLines, featured Hines' story in Race and Recession, a 2009 investigative report on the uneven fallout of the economic downturn. The report finds that the economic crisis is not only impacting communities of color at disproportionate rates, but that the country's long failure to address systemic racial inequity through public policy eventually threw the whole economy into free fall.

Now, as the country slumps toward completing a third year of this recession, it continues to roll roughshod through communities like the one Hines once called home, where boarded up windows and empty driveways now litter a once vibrant neighborhood. Despite the Obama administration's  foreclosure prevention program, little has changed in either the scale or pace of lost wealth--and community--in places like this. In the ColorLines video above, which was featured on GRITtv this week, Hines revisits her former community and reflects on her own loss.

A recent report from the Center for Responsible Lending found there are almost 6 million homes at imminent risk of foreclosure right now. These are homes where the owners are at least two mortgage payments behind.
 
Goldman Sachs estimates that by 2014, 13 million homes will be gone. And Black, Latino, Asian, Native American and Alaskan Native/Pacific Islander borrowers are all more likely than White borrowers to be at risk of losing their homes immediately. One in five of both Black and Latino homeowners today are at the brink of foreclosure.

In dollars, the losses already tallied will mean that between 2009 and 2012, Black and Latino communities will be drained of $194 and $177 billion, respectively, because of the plummeting home values in the high foreclosure neighborhoods. "This is wealth that would have been passed down, used to pay for college, to use in retirement, to buy a car," says Keith Ernst, who authored the Center for Responsible Lending report.

In 2009, the White House pushed through its Home Affordable Modification Program, or HAMP, as the president's signature foreclosure prevention program. Congress rejected reforming bankruptcy law to allow judges to modify home loans and the administration resisted calls for HAMP to include forced reductions of principal balances on loans. Instead, HAMP offered mortgage servicers incentives to reduce struggling borrowers' monthly mortgage payments to no more 31% of their income by bringing down interest rates and extending the life of the loan.

In March, the administration updated the program to urge loan servicers to adjust principals on homes where the owner owes more than the property is worth and to encourage modifications for unemployed borrowers who are not yet in default.

The program has nonetheless failed by any measure to meet the need, mostly because it remains little more than a subsidy for the servicing industry and fails to make meaningful modifications mandatory. As of May, servicers participating in HAMP had reworked a mere 340,000 mortgages, which amounts to only about a fifth of the homes eligible for a modification under the program.

"At best," says Ernst, "HAMP might help in the low millions of owners. But when we're up against the more than 10 million number, that's not enough."

Advocates continue to campaign for the administration to force servicers to write down principal balances on underwater loans. More localized movements are pushing for even more. Hines helped start a Michigan group called Moratorium Now. It's pushing for a total halt on foreclosures in the state for a period of several years--something President Obama supported nationally during his 2008 campaign.

While a moratorium is not a long term fix, "it lets people facing foreclosure get their finances together and figure out what's going on," says Hines. Until the principals of underwater homes are adjusted, it might be the only solution.

"It's easy for people at risk of foreclosure to keep spiraling and spiraling," adds Wilhelmina Leigh, a senior researcher at the Joint Center for Political and Economic Studies. Three years into that spiral, she says, "We still don't have the kind of infrastructure we need to help."

Meanwhile, the recessionary forces are compounding upon one another. Foreclosures stemming from the subprime schemes that swept communities of color have now been largely replaced by foreclosures caused by job losses. "Foreclosures are hitting people who had been doing okay," explains Leigh, "who hadn't gotten an adjustable arm and now they've lost their jobs."

The Labor Department's June jobs report shows unemployment for all Americans remains stuck at just under 10 percent. The number is much higher for Blacks and Latinos, who face 15.4% and 12.4% unemployment respectively. That's compared to 8.6% for whites. And young people of color, single moms, those in the construction industry and those who were in the lowest income bracket even before the downturn are without jobs at even higher rates. Black teenagers are looking at summer unemployment levels of almost 40 percent.

The jobless have not gotten much good news from Washington recently. Congressional deficit hawks defeated a much needed unemployment benefits extension even though 46 percent of the unemployed have been without work for longer than the normal benefits last. More than a million will now be left without a job or income support.

 Sandra Hines urges Chase Bank to help victims of foreclosures at the Chase Bank building in downtown Detroit.

So, community leaders like Hines continue trying to build momentum elsewhere, like here on the streets in Detroit, where last month Hines carried a bullhorn at the front of a crowd of hundreds marching on the Chase Bank building downtown. "Money for jobs, not the banks! Money for education, not the banks! Money for healthcare, not the banks," she chanted, in a sadly familiar refrain.

Later that day, back at her old home, Hines stood on the porch and, spotting an elderly woman in a driveway across the street, lifted her hand to wave. "Hello Miss James," she called.

"This has become a real community," she said.

As she stepped off the porch, a black Dodge truck raced up the road and stopped in front of the house. A man got out and walked quickly over to the lawn.

"What's going on over here?" he asked. "I'm the owner of this house."

"I used to live here for 38 years," Hines replied, staring at the younger man.

"I lived around the corner for 40," he offered, before wishing Hines well and heading back to the car. Hines called after him to dismiss any tension from the awkward exchange. "Ain't no problem with trying to check on your property," she assured her former neighbor. Then she walked next door to say hello to another one-time neighbor, and came out with a few pieces of mail the neighbor had saved for her. "This is where we lived," she said.

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The total value of Florida foreclosures repossessed by banks in the state increased by nearly 8 percent in the first quarter to $1.77 billion, based on figures from the Federal Deposit Insurance Corporation.

These properties in bank owned listings also contributed to the downfall of a lot of banks in Florida. On May 7, the FDIC closed the tenth Florida bank to tumble this year and as of March 31, a total of 24 Florida banks were struggling from under-capitalization.

The FDIC has already lost almost $1.3 billion to pay claims arising from Florida bank failures this year, in addition to its $7.3-billion loss in 2008 and in 2009 involving 16 failed Florida banks.

This year, 17 more Florida banks are expected to collapse this year if there is no significant intervention to rescue these distressed banks. Their substantial exposure to Florida foreclosures are tying their hands up, leaving them with no funds to finance their operations.

Based on interviews with Florida bankers, the cost they have to bear to put properties into listings of foreclosure homes so they can resell them has shot up to around $100,000 per one foreclosure case, up from only $40,000 in 2007. The time spent to complete foreclosures has also lengthened from only 6 months in the first months of the crisis to around 18 months this year.

What worsens the situation after all the costs and hassles banks undergo is to be forced to list their repossessed properties as cheap houses for sale, as higher-priced foreclosures languish on the market.

Despite the decline in foreclosure activity in the state in April, Florida moved up from fourth-place to third-place on charts of foreclosure listings by state during the month. It was California which improved by two places from second in March to fourth in April.

To help banks survive the effects of Florida foreclosures, the Florida Bankers Association has proposed in the last state legislature session to speed up the foreclosure process.