About Foreclosure, Pre-Foreclosure & REO

Foreclosure is a legal process that allows a lender to take possession of a property for non-payment of a loan that is secured by that property.  This is a very unpleasant experience.  If you sit back and do nothing, you will get thrown out of your own home.  Don't wait for foreclosure to happen.  Be proactive, and do something... early on well before the foreclosure process starts!  It will pay for you to plan ahead... and not "hope" that a miracle would happen.

When a property is in pre-foreclosure, the owner still has a chance to stop the foreclosure process by paying the entire balance that is owed or by selling the property; and this will include "short-sale" as explained in the About Short-Sale section.

After a property owner misses  several mortgage payments, the lender starts sending out letters or notices, and the owner has a pre-foreclosure period of few weeks to few months to bring the payments current and to stop any foreclosure proceedings.  If the owner does not bring the delinquent payments up to date during this period, the property will be sold at a public auction.  This entire process can last several months.  For this reason, lenders do not wish to foreclose if at all possible.

The lender would usually repossess (take ownership of) the property either through an agreement with the owner during pre-foreclosure period or at the public auction.  The lender usually sells the property to recover the unpaid loan amount.  How long the foreclosure process takes depends on the state you're in.  In Pennsylvania and New Jersey, it usually takes nine to ten months.

After repossession, the property becomes a so-called REO.  REO means Real Estate Owned [by the lender]. It's another way to say the property has already gone through the foreclosure process, and has now been repossessed by the lender.  Lenders often want to get REOs off their books quickly.  However, there is usually a "redemption period" (10 days for New Jersey and no redemption period in Pennsylvania) for the owner to buy-back the property after it is repossessed by the lender, and the lender will typically wait the end of any redemption period before selling the property.  During this entire period (from pre-foreclosure to REO sale by lender), the owner and the lender generally receive phone calls from people (or investors) who are interested in buying the property.  They try to arrange a meeting to discuss a possible sale and to preview the property.

The book, Short Sale, A Practical Approach is now available at Amazon.com.  It will show you in greater detail what it takes for lender to approve a short sale transaction.  It covers information about the patience required in dealing with the lender, and how to successfully negotiate a short sale by understanding the process.  Here's more information on this book.

How Can Danny Cachuela Help?

You must work with someone who is not in the business of buying these properties (also known as distressed properties).  People who buy distressed properties usually buy them at "low ball" prices.  This is because they are in the "business" and they have to make money out that purchase.  Instead, work with those who are in the business of helping homeowners avoid foreclosure.

How can Danny Cachuela help avoid foreclosure?  Danny Cachuela is not in the business of buying pre-foreclosure or foreclosure properties.  Danny Cachuela is a licensed real estate agent who is knowledgeable in handling short-sale of homes.  This is a specialty since many agents do not even know what a short-sale is; and those who know generally do not want to be involved in it due to its complexity compared to a regular home sale.

A home that is in pre-foreclosure status is not necessarily for sale.  The owner may still be pursuing other options to cure the default, which could include re-financing of the loan.  However, an offer from a financially-qualified buyer could sometimes be the best solution to get the owner out from under the impending foreclosure.

Danny Cachuela can help you avoid foreclosure in the following ways:

1. You will receive assistance in preparing a financial analysis to establish your financial difficulty, or to determine eligibility for re-financing.
2. You will receive assistance in preparing a letter to the lender to give you some time as you are pursuing the alternative of selling your home as a normal sale.
3. If necessary, we will help you sell your home as a “short-sale.”  A short-sale is a sale of your property for a price where your net proceeds from the sale would be less than the amount you would need to payoff your loan.  Not desirable, but sometimes necessary to avoid foreclosure and frequently the case in a “down” market.  In this situation, remember that the lender will, in effect, be paying for the commission.  Thus, for those who are trying to sell their own home as a FSBO to save the commission, this will no longer be necessary.

4. We will prepare for you a Comparable Market Analysis (also known as CMA or Competitive Market Analysis) to establish a realistic asking price and prepare a Net Sheet for you to present to the lender. The lender will usually ask for a Broker Price Opinion (BPO), but we do not get involved with that because of perceived conflict of interest.

In detail, here's what Danny Cachuela will do:

1. Handle your administrative file
2. Handle negotiation with your lender
3. Prepare your Net Sheet (Estimated HUD-1)
4. Organize the entire short sale package
5. Submit the complete short sale package to your lender
6. Resubmit the package because bank lost it (sometimes as much as four times)
7. Confirm bank receipt
8. Coordinate BPO or Appraisal
9. Follow-up with your Lender (many, many times)
10. Negotiate settlement with lender's loss mitigator
11. Receive discounted mortgage payoff letter
12. Fax you the approval from the bank
13. Coordinate closing
14. Keep you updated everytime your file is updated

The key benefit to the borrower is that it increases borrower's credibility in dealing with the lender because borrower employed the services of a professional.

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