If you’re a first time home buyer, you may not understand why banks foreclose on homes. While the term might be familiar in terms of hearing it in other people’s conversations, sometimes the meaning can be a bit muddled.
Basically, a foreclosure occurs when the homeowner defaults on the payments and the bank takes the property back. That means they need to sell it off right away to recover those lost payments.
In these situations, new buyers can get the property for a song if they know how to negotiate properly. This requires a bit of research on their part, but it can pay off big time, especially if the new owner rents it out.
Loss of Job or Health
It may not be a conscious choice by the homeowner to go into foreclosure either. They could have lost their job or been injured, and therefore unable to work. In these cases, it’s a matter of putting food on the table or paying the mortgage, and most wisely choose to care for their families.
Accumulation of Debt
Another reason could be an impossible amount of debt that has accumulated. If they fall under the pressure of these bills, they may not have a way to pay the credit cards, tax bills, daily bills and the mortgage as well. Something has to give, and in these cases, it was the house itself.
Relationship Changes & Problems
Of course, relationship problems can cause this too. If a couple is planning to divorce and cannot decide who will keep the house, they may simply choose to let it go.
Neither will take on the payment, so they will both deal with the results of the foreclosure later on. This is sometimes the simplest solution, especially when they have several bills to think about already.
When you know what a foreclosure is and where it comes from, you’ll understand your role as a potential home investor. You may choose to live in it yourself, offer it to a family member or rent it out to a stranger.
It’s a great way to get a nice property for a low price and can introduce you to a brand new stream of real estate income on the side.
This is filed under Foreclosures.