It is impossible to turn on the news these days and not hear about the financial meltdowns of corporations, large companies and individuals. It is distressing to hear of the housing bust and of people losing their homes to foreclosure. Foreclosures occur for a variety of reasons, the most common being because of loss of employment, death, separation or divorce. We are also learning that many foreclosures are occurring because of very poor lending practices on the parts of the banks; however we won’t go into the politics of that here.

So what is foreclosure exactly? It is the final step a lender will take against a borrower who cannot pay their debt. The lender will try to collect all or part of a previously uncollected debt against the real estate. Each state has it’s own foreclosure process but typically begins when a lender files a notice of default or lis pendens against the property owner. All interested parties are now officially alerted to the pending foreclosure action. Clearly you do not want to get to this point. The most important advice for anyone facing foreclosure is to not avoid phone calls or certified letters. Rather, it is very important that you contact your lender as soon as possible. It may be possible to negotiate or re-structure the terms of your loan to make your payments more affordable.

If you do not contact your lender or if the lender is not amenable to your proposals the next step for the bank will be to set the date of the foreclosure sale if you the borrower is not able to satisfy the bank demands within a specified period of time. The sale is actually an auction where the lender sets the price that is will be sold for. If the price is not met the bank will then take ownership of the property. If this occurs the property is then termed REO, or Real Estate Owned. Banks really don’t want to own your real estate and the borrower has the right to either satisfy the loan or sell the property right up until the auction. Keep in mind though, that if you are able to sell the property prior to, or even during auction, that proceeds from the sale will go towards satisfying the debt. You really need to find the funds to speak to a good property attorney about your options and rights.

In some states there is a statutory redemption period. What this means is that statutory redemption allows the mortgagor (the homeowner) to regain ownership of the property after foreclosure sale. About half of the states have statutory redemption laws. Generally, these laws give anywhere from six months to a year for the mortgagor to redeem the mortgage by:

• Payment of the foreclosure sale price, and
• A statutory rate of interest to the sale purchaser.

Junior lien holders also have a right to redeem under statutory redemption laws (in order of their priority) though not until after the period for the mortgagor to redeem runs out. As a rule, the mortgagor can retain possession of their property during this statutory redemption period.

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During an economic boom where there are people actually competing to buy homes, a short sale would not be an option. However, with the state of today’s economic climate and the increase in the number of homeowners in Phoenix, Arizona in a negative equity situation, sometimes it is the only sensible option to avoid foreclosure.

Lenders do not want to own real estate, nor do they want to go through the lengthy foreclosure process. Both these options are costly to the lender and most would like to avoid incurring any extra costs when they have no alternative but to call in a loan.

If you have been served with a foreclosure notice and have no idea what to do next; you really should consider trying to negotiate a short sale.

What you will have to do is to try and show your lender that, in these circumstances, they have more to gain if they agree to a short sale. You will have to provide them with hard facts and figures in order to persuade them that it will be in their best interests. You will need to show them, using facts, figures and statistics that it will benefit them more than foreclosing on the property and then having to sell it themselves.

However, negotiating such a sale is a very complex and time consuming process and usually beyond the scope of most homeowners.

Your could try speaking to your real estate agent but the problem here is that most have never negotiated this kind of sale. So you really need to be thorough in your research. Ask lots of questions in order to determine if the real estate agent has any actual experience in negotiating a short sale. This kind of sale required extra training that not many real estate agents have. Don’t despair there is a better option.

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Residential foreclosures tend to be very popular with both homebuyers and investors. However, if you want to invest in foreclosed property, you will want to consider commercial foreclosures as well.

You probably already know what residential foreclosure homes are. These are properties that are used as private residences. They are foreclosures because the last homeowner did not pay their mortgage and the loan went into default. The lender repossessed the property – and resold it, usually at a good discount – to recoup the money. Commercial foreclosures are also properties that have been repossessed by a lender. The difference is that these properties are zoned for business or commercial use. These properties include land that has been zoned for commercial use, retail spaces and stores, warehouse spaces, factories, and many other types of business buildings.

If you want to invest in foreclosures, there are many reasons why commercial foreclosures are very appealing. First of all, there are many commercial properties in foreclosure. You have probably read the statistics about the high rate of failure among new businesses. When businesses go bankrupt, the business holdings or properties often go into foreclosure. There are therefore many business foreclosure properties available across the country.

Secondly, there may be less competition for commercial foreclosure real estate. Both homebuyers and investors want to buy foreclosed homes, but usually only investors consider buying commercial foreclosure property. As well, the demand for these properties tends to be high. Even when homebuyers are scared off by high interest rates, businesses still need spaces to run their companies, and that means that commercial groups are still buying and renting property in all sorts of economic conditions.

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