Industry Articles

Foreclosure Benefits Investors

By May 28, 2013 Posted in News

Seizing on South Florida’s glut of foreclosed homes that are currently sitting vacant and rapidly deteriorating, real estate investors are capitalizing on a strategy that allows them to purchase home titles quickly and cheaply through community association foreclosures for the purpose of renting them until banks can recoup their losses.

Because lien holders of these homes are primarily banks that are drowning in foreclosure proceedings, it sometimes takes several years before the foreclosure process is completed on a single home. Consequently, investors who purchase and then rent these homes could be rewarded with a large return on their investment.

What are Homeowner Association Foreclosures?

Characteristics of this type of foreclosure include unpaid association dues and assorted judgments that are ultimately much less than the amount owed on the mortgage. Crackerjack investors know they can purchase a foreclosed property from one of these associations for pennies on the dollar and potentially triple their investment by renting the home.

Although this strategy benefits both homeowners associations who desperately need the funds and investors looking for a financial windfall on this kind of undertaking, tenants who rent one of these foreclosure homes may unwittingly put themselves in a stressful situation when mortgage lenders start repossession proceedings on the home.

However, real estate law attorneys in south Florida who have been investigating the legality of investors purchasing and renting homeowners association properties in foreclosure state that it is, in fact, legal as well as extremely lucrative for investors to engage in this  type of business model.

How Investors Implement a Rental Plan

Initially, an investor will search for homes not yet implicated in foreclosure proceedings or is involved in a proceeding that has stagnated. The investor purchases the title through auction for much less than the balance on the mortgage, giving him or her legal rights to the property that remains subject to a bank-held lien.

Once the home is rented, the investor is responsible for maintaining the property, collecting payments and paying dues to the homeowners association, which is why many of these associations are quick to begin foreclosure proceedings when the homeowner stops paying dues to the association. Investors purchasing homes already in foreclosure often attempt to delay proceedings by contesting the foreclosure or negotiating with the lender in an attempt to buy the home. 

Upon foreclosure proceedings ending, the investor’s claim to the home is superseded and the bank now legally possesses the property. Until the bank sells the home to a third party, tenants living in the home are protected from immediate eviction by the Protecting Tenants at Foreclosure Act of 2009. Otherwise, tenants will receive a 90-day notice to vacate the premises once the home legally belongs to someone other than the bank or mortgage company.

For more information about investing in homeowners association homes in foreclosure or if you are a homeowner facing foreclosure and need advice regarding your options, call Mansfield Bronstein, PA today for professional assistance in all areas of real estate law and litigation.

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