The breakdown of the real estate market is the primary driver of the recent recession and economic crisis because of declining property values combined with defaulting mortgages. There is a new foreclosure filing every 8 seconds nationwide. During the year 2009, there were 3.9 million foreclosure filings. During the last quarter, ending Dec. 2009, there has been decrease of 7% in foreclosure filings from the previous quarter and an increase of 18% from the 4th quarter of 2008. As per the latest statistics, one out of every four homes is under water. The number of people who have been offered loan modifications is about 500,000 which is a small number as compared to total number of defaults. To add fuel to the fire, more than 37% of modified loans were 30 or more days delinquent or in foreclosure after three months. After six months, that re-default rate was more than 55% as per the Office of the Controller of Currency. Furthermore, in December 2009, U.S. unemployment numbers reached 10%. Government programs have been created to stimulate the economy and stabilize the real estate market. However, initiatives by the government need to be supplemented by the efforts of innovative individuals.
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A solution lies in educating people to become employers. The government spends a lot of money for different programs but there is not enough done to educate people on how to be self-employed and to become entrepreneurs.
There is a way that these foreclosed houses can stimulate the economy and create employment sooner rather than later. Before I discuss that method, I feel it is important to know a little bit about foreclosures. Most of the times, there are 3 stages of foreclosures:
1. Pre-foreclosure stage: The period of time during which the borrower begins to miss payments but the lender has not yet formally declared an event of default. This stage is usually a waste of time as the borrower is mostly in a stage of denial.
2. Default and Auction stage: The period of time that begins with the lender formally declaring the borrower to be in default and ending with the foreclosure sale. Auctions are mostly waste of time as you can buy foreclosures cheaper at other stages.
3. REO stage: The period of time following the expiration of the borrower's redemption period during which the lender owns the real property. It is possible to buy foreclosures at this stage but there is a lot of competition.
SHORT SALE IS THE KEY TO SUCCESS
Short sale which can occur at no.1 or 2 stage, is an excellent way to buy foreclosures. A "short sale" is a sale by a borrower to an investor, approved by the lender, at a price below the amount due on the loan. The parties to a short sale are the borrower, the investor, and the lender. "Short sales" are a WIN-WIN-WIN situation for all the three parties. The borrower does not have to ruin their credit by going through a foreclosure, the lender gets a distressed asset off their books, and the investor gets to buy the property at a discounted price.
CREATE EMPLOYERS - THEY WILL CREATE EMPLOYEES
There are many techniques to buying real estate with little or no money down. I have discussed 14 such in my book, A To Z of Foreclosures- Real Estate Worth Millions Acquired with $101.
One method for the investor with no money is to seek a partner, who has money to invest, and split the profits. For example, if the investor can find a single family residence listed for $200,000, and is able to make a short sale deal of $100,000 with the borrower and lender, the investor and partner can both reap the rewards.
The investor could be a person who is unemployed with little or no capital but has the time to find properties worth buying and the partner could be a person who has money but no time or expertise in locating and negotiating the purchase of suitable properties.
Buying foreclosures is a simple business model yet there are hardly any efforts being made to educate people about foreclosures. For each property that is purchased, there are a number of individuals employed. The properties must be renovated - thus employing brokers, title companies, attorneys, construction workers and others.
I am unwillingly stating the following facts so as to be a source of inspiration to others. I moved myself from India with a total of $8 in my pocket and now I am in top 1% of all Americans. I also moved hundreds of homeless families living in shelters to decent housing. This helped me to change some neighborhoods which were known as having very high crime rates into safer communities. I have always wanted to pay my debt to the beautiful people of America where I became so successful. Towards that goal, I have gone from one non- profit organization to another to educate people about one of simplest business models in the world - which is buying foreclosures. I have been giving away my books on foreclosures for free. It was amazing to note that a majority of the people wanted to be in this business but never got involved because they weren't supplied with the necessary knowledge. It takes only a few minutes to convert an unemployed. but willing person into an entrepreneur, a person earning 2% interest in the bank to earning 10, 20, 50% or higher return on the money and to convert an unoccupied, abandoned house to a decent home for someone.
All we need is an open mind and positive thinking. Let's not just concentrate all our efforts towards the unemployed by only helping them seek employment, but by also encouraging them to become business entrepreneurs. We are a country of enterprising people, with countless stories of immigrants landing here with nothing but finding success. So, let us use these obstacles as opportunities as a nation to revive our economy and lead ourselves and our nation towards brighter times. We need to build our inner strength.
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