Helping someone in pre foreclosure save their credit?

12 Replies

Hi All,

I've been learning about pre foreclosure leads as possible deal sources.  People who teach this subject are always referring to how you're helping people by purchasing their home and saving them from foreclosure thus saving their credit.  There is a property in foreclosure in my town that I'm interested in, but I'm confused about a couple things:

1) How do you answer the objection from the seller who says their credit is already ruined because of missing so many mortgage payments? 

2) If the seller has a lot of equity, I would structure my offer so that the seller receives some of that as cash for moving/relocating expenses, etc. But doesn't the lender have to do that as well once the property becomes an REO and is sold?

Thanks!

Sal

Well, their credit Is already trashed due to the missed payments.  A foreclosure afterwards does do some further damage, but the majority is already done.

If the property sells at the foreclosure auction for more than the judgment amount then they would get the balance, assuming there are no additional liens..

You will hear a lot of untrue and exaggerated claims and ideas in guru “training”.

Hey Sal,

1) How do you answer the objection from the seller who says their credit is already ruined because of missing so many mortgage payments?

Are they arguing for more money from a buyout?  Or are they refusing to move until forced out the door, and in that case they'd lose everything?

2) If the seller has a lot of equity, I would structure my offer so that the seller receives some of that as cash for moving/relocating expenses, etc. But doesn't the lender have to do that as well once the property becomes an REOand is sold?

I don't know the specific answer to this one. It almost sounds like cash for keys, right? The difference would be if you bought it without it going to auction, for the price they owed, how much can you afford to pay them, and still make a decent profit on the deal. Perhaps talking to a title agent is your answer.

Good luck!!
Tish

CA OR and WA have very specific laws as it relates to what you can and cannot do with a homeowner in foreclosure you should read those before you do anything.. they have severe penalties for violators..

Once you figure what you can and cannot do legally.

1. as Wayne above state Credit is trashed. your bringing no value there In West coast Purchase Money Deed of trust foreclosure  credit is trashed and bank has no right for a deficiency judgement. 

2.  folks in foreclosure can be very hard to deal with as most are in a severe case of denial.. sometimes we think they are or should be motivated but living for free as long as they can is more motivation than helping them move or giving them what amounts to crumbs for their equity.

Thanks everyone for your comments!

You have confirmed what I was afraid of, I'm bringing no upside to the seller by saying that selling to me will save their credit.

@Letitia Harris Good to hear from you Tish, hope everything is going well.   As for my first question, I haven't talked to the homeowner yet.  I've hand written a letter and received no response.  (It's been about a week).  Just trying to anticipate all of the possible objections from them so that I know how to answer.  Regarding my second question, you're right, I think doing a title search is my next step in order to insure that their is indeed a good amount of equity.

Sal

Foreclosures stay on credit reports longer than short sales. Any borrower who wants to mitigate credit repercussions likely should attempt a short sale. If it's a REO / Bank Owned Home you would be dealing with the new owner which would mean the home was already foreclosed on.

@Sal Souza Their credit is not ruined! Its damaged but not ruined. They will undo any long term damage by selling and paying the loan off on their mortgage!!! Now getting a foreclosure, that WILL ruin their credit. When you make arrangements with the homeowner, they have some control over what is going on, even if they don’t have the means financially to rectify them (this is where you come in) time to find a place that is within their means, and the money to do it with! If the house forecloses, they get NO benefit, NO control, NO credit , and whatever the overage may or may mort be on what they owed. You are the answer to Their problem!!! Go get it!!!
Originally posted by @Brett Goldsmith :

Foreclosures stay on credit reports longer than short sales. Any borrower who wants to mitigate credit repercussions likely should attempt a short sale. If it's a REO / Bank Owned Home you would be dealing with the new owner which would mean the home was already foreclosed on.

 I usually agree with your posts Brett but on this one I disagree. Both stay on for the same amount of time. While I am the credit reporting contact at my bank, I admit that maybe something changed I wasn't aware of? I don't think so but, it's possible (Not probable). Both are seven year events. If you have something showing its different, I would appreciate you sharingit.

Originally posted by @Sal Souza :

@Sal Castaneda Sorry for taking so long to respond...Thanks for your input, I'm very encouraged by what you say.  I just sent some direct mail to several pre foreclosure properties today.  We'll see what happens!

I'd pay close attention to Jay's post...make sure those fliers don't make you look like a foreclosure consultant.

@Ron S. Thanks for correcting me, I'm wrong to my understanding too when I reread what I wrote. I believe I was trying to articulate that it may be easier to get more desirable financing in a shorter period of time in the future with a short sale than a foreclosure on your credit and that a foreclosure on ones credit is less desirable.