Kenny Rushing

Foreclosure Frenzy
by Kenny Rushing

Today it is hard to avoid stories surrounding the current foreclosure epidemic. You can open any newspaper and find an article about the increase in the number of foreclosures in the United States.

In 2000, the stock market plummeted, the dot.com era had come and gone and investors were frightened. Therefore, many fled to what they believe to be safer ground and poured money into real estate. This caused housing prices to accelerated upward more rapidly.
With the volatility of the stock market, the Feds lowered the interest rates, easing the slowing economy. This helped make housing affordability and speculation even more attractive ushering in a real estate boom.

This real estate boom was also fueled in part by easy to get Adjustable Rate Mortgages (ARMs). Young families and other first time homebuyers, who could not qualify for the traditional, fixed rate mortgages, were able to get out of the rental apartments and into a home with the ARMs.

It was a sweet deal until the first time the mortgage interest rates adjusted upward. Then it happened again and again and before long, the sweet mortgage deal turned sour.

There are also several other reasons why a property owner may go into foreclosure. Few choose to go into foreclosure voluntarily. It's often an unpredictable result from one of the following:
  • Divorce
  • Business failure
  • Laid-off, fired or quit job
  • Inability to continue working due to medical conditions
  • Excessive debt and mounting bill obligations
  • Job transfer to another state
Right now, as I write this article, foreclosures are worse than ever before. In 2008 alone there were over 3 million foreclosure filings in the United States. States like Nevada, California and Florida were hit the hardest.

What is Foreclosure?

Foreclosure is the sequence of legal proceedings by which a lender sells or repossesses a home when the homeowner has stopped making payments on the mortgage. When a homeowner becomes delinquent on their mortgage obligation, their only option is to make up the back payments, file bankruptcy (to buy some time) or sell the house.

As a Deal Maker, purchasing foreclosed properties can be a terrific real estate investment and divestment for the troubled home owner -- and it might spare the home owner's credit rating before things get any worse. It is your job to sniff out clues to find out why they are in foreclosure so that you can try to help solve their problems.

The Two Types of Foreclosures

The foreclosure process varies from state to state. There are basically two main types of foreclosures and depending on whether it is a title or lien state, will determine whether a judicial or non-judicial form of foreclosure is involved.

Judicial Foreclosures: These pertain to mortgages, rather than deeds of trusts. They are processed through the courts and take significantly longer to complete.

Here are the steps:
  • The Lender hires an attorney start the foreclosure process once the loan is 90 days past due.

  • The lender sends a "Notice of Intent to Foreclosure" or a "Demand Letter" to the loan borrower.

  • This letter informs the homeowner that the lender will take legal action if the loan is not brought current.

  • A Lis Pendens/Complaint is filed.

  • This is when the foreclosure becomes public record. You can get this info from your county courthouse or foreclosure list provider.
  • The homeowners are served the foreclosure papers. A court hearing and notice of judgment is set for the sale of the property detailing the time, date and place of the sale.

  • The auction is held--The highest bidder gets the property.
  • Redemption Period--In some states there is a "right of redemption" period which last from 30 days to 6 months depending on the state, where the owner can buy back the property.
Non-Judicial Foreclosures: These pertain to deeds of trust where a third party, called a trustee, handles the entire process in a matter of two to four months after a borrower has defaulted and stopped making payments. Once the property passes through the non-judicial phase, it is then ready to be sold at auction to the highest bidder.

Here are the steps:
  • The Lender hires an attorney start the foreclosure process once the loan is 90 days past due.
  • Notice of Default is filed. This is when the property is public record giving notice that the property is in foreclosure.
  • The sale is advertised as Notice of Trustee Sale.
  • Auction is held.
  • The highest bidder gets the property.
  • Redemption Period. There is no redemption period after the auction.
The Three Stages of Foreclosure

Now that you know the two types of foreclosure, you also need to know the three ways to acquire distressed property, based on where the property lies in the foreclosure process. The three stages are as follows: pre-foreclosure, foreclosure and post-foreclosure.

Pre-Foreclosures
This stage is before the auction. This is the area of foreclosure where your main focus should be where you will likely be able to do the most good for the distressed homeowner by helping them with a short sale.

Traditionally, when a homeowner got behind on their payments, the bank would foreclose on the property, sell it at the foreclosure auction, or buy it back and list it with an REO broker to resell. However, this can be a very expensive process (foreclosure legal fees, maintaining insurance on the home, property management, repairs, and other expenses) that some banks are cutting their losses by allowing a short sale or short payoff with the property owner. This can create a perfect opportunity for a Deal Makers to make a lot of money.

To be successful doing deals with pre-foreclosures it is important to know how to access these leads so you can contact the homeowner (BEFORE other investors do) first. Your best potential leads to locate a property at this stage may come from attorneys, mortgage brokers, real estate agents, or through business associates and friends.

Foreclosure Stage
This is the stage where the auction takes place. In the case of a judicial state- after the lis pendens is issued, if the homeowner has not cured the back payments, a sheriff's sale, or public auction, follows the judgment, and the court will confirm the sale and issue a sheriff's deed to the highest bidder.

In the case of a Non-Judicial State - after the Notice of default is issued, the lender or their representative (the foreclosure trustee) will set a date for the home to be sold at the auction called a Trustee Sale. The Notice of the Trustee Sale is issue if the homeowner has not cured the back mortgage payments. The sale is published, recorded and posted publicly, and a public auction will be held for the sale of the home.

Post-Foreclosure
If an investor does not purchase the property at the foreclosure auction, the lender takes ownership of it. Then, the property becomes what is called a bank-owned property, also known as REO (Real Estate Owned).

If the property becomes an REO, the bank will try to sell the property below the amount owed since they do not want to own property. These properties are sold in one of two ways. Most often, they are listed with a local real estate agent for sale on the open market; or they are put on the Multiple Listing Service (MLS) so that local buyers' agents can show and sell the property to a qualified buyer for a commission.

However, if the property does end up in the hands of a private investor, rather than with the lender, you may still be able to make an offer and match that property with one of your buyers.

It is critical that you identify one of the three foreclosure stages and become an expert in that particular process.


Kenny Rushing
Kenny Rushing is a remarkable tale of a life turned around. A resident of Tampa, Florida who is an evolving account of transformation that is simply extraordinary.

Kenny is best known for the moving story of his humble and troubled beginnings, and his phenomenal success as a real estate investor - in spite of the seemingly insurmountable odds he faced. He is a phenomenally successful real estate mogul, civic leader and devoted philanthropist. His company, Rehabbers Superstore, Inc., now grosses millions of dollars per year through real estate transactions and investments.

Kenny Rushing is quickly becoming known for the life transforming impact his uncommon wisdom is having on the lives of those who have benefited from his knowledge, wisdom, training and coaching. His goal over the next five years is to teach 1 million people how to achieve financial independence and flip their life through real estate investing. Kenny Rushing is a living testament that: If KEN Can Do It - So KEN You!


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