2007 Foreclosures

It is predicted that 2007 will be a big year for foreclosure sales. Nationwide foreclosures were up 35 percent from December 2005 to December 2006. This is according to RealtyTrac.com.

The biggest culprits for this prediction of increased foreclosures are the combination of resetting ARMs and slowing home sales. Many Adjustable Rate Mortgages (ARMs) have reset in 2006 and will continue to reset in 2007. This is forcing homeowners with these loans to pay increasingly higher mortgage payments because of the ARMs’ increasing interest rate. The slowing real estate market makes it more difficult for these owners to sell their homes before foreclosure sets in. Many of these homeowners are even unable to refinance into new ARMs because of credit issues, lack of equity, or an inability to qualify for today’s higher ARM rates.

This is creating new opportunities for foreclosure investors, but you will definitely need to do your research. The foreclosure market is very different from the generic properties listed by a seller’s agent on the MLS. Properties on the MLS for the most part are in good condition. There are standard contracts with contingencies that can protect the buyer if the property turns out not to be exactly what they thought it would.

As for foreclosures, the buyer has a huge disadvantage. The contracts are usually created by the seller (which is the lender) and it is written totally in their favor. The seller wants to get rid of the property and usually will not allow many, if any, contingencies that will allow the buyer to back out of the deal without losing their deposit. It is very important to hire a seasoned foreclosure real estate agent and attorney to take a look at the contract before committing to it.

The seller wants the transaction to occur as quickly as possible and that is why they try to control all aspects of the transaction. As the buyer, you must perform your due diligence and have a good settlement company, lender, and real estate professional with experience in foreclosure sales in your area. This will help you wind through the process and avoid potential costly mistakes.