Colli Real Estate

How come mortgage lenders don’t want foreclosure?

I am refering to if the loan thats due is worth significantly less than the value of the property. So in that case, why would a lender not want to sell this property and gain all of the profits from the sale?

Um, because it takes like a year for the legal process of foreclosure to complete. And by the time that happens, the house has been vacant for a year and has often been totally neglected and vandalized. So, the bank lends out $100,000 for a house.. then after the sheriff’s sale they can only sell it for… like $50,000. OR they can’t sell it at all, which is increasingly the case right now because there are just so many of them.

But, it’s only been recently that banks have been reluctant to foreclose and have been willing to work with buyers. Before the “foreclosure crisis” hit lenders basically showed no remorse.. and were happy to foreclose on anybody who didn’t make payments. It was a small write-off for them, and showed people the consquence of not paying on time. But now it’s just become too much of an expense and a lot of banks are trying to avoid it if they can (although not really trying hard enough in my opinion..)

Banks DO go through the forclosure process that you outlined in your example. If it were profitable we wouldn’t have seen a multi-billion dollar bank bailout. This rash of foreclosures is what has directly lead to the near detriment of our entire financial system. Foreclosure sales are NOT profitable for banks!

But, yes, you can take over a person’s loan. It’s called a “short sale”, and they happen all the time. A third party buyer comes in and negotaites a deal with the distressed owner and the lender. The lender sells you the house for the price of what’s left on the loan. The previous owner walks away empty handed. The house then wouldn’t go into foreclosure, though. You would just then own the house and then you could sell it yourself (nobody buys most of these things at sherrif’s auctions anyway.)

Google the term “short sale” and you can find info.. or go to the library and get a book on real estate investing. I suggest learning as much as you can before getting into this business. You can lose a lot of money in it..

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