Anon1234_IHB
New member
<p>Hello: I am new to this forum, even though I have been reading for some time now. I was looking on <a href="http://www.foreclosures.com">www.foreclosures.com</a> for fun...just to see what the site was about. I used to work with REO properties, but in an asset mgmt (after the foreclosure) role. </p>
<p>Here is my question: Can anyone provide me a real life or realistic hypothetical example of a person making a "good buy" on a preforclosure home? Here is what I don't get...</p>
<p>Generally, a preforclosure has conditions where the market price (net of selling costs) is lower than the existing debt and/or liens on the home...right? If this were not the case, the distressed owners would simply sell the home and be done with it. </p>
<p>The way I see it is there is NO GOOD BUYING OPPORTUNITY on a preforclosure because the owner cannot possibly afford to sell at a market price due to the fact that they will have to pay off exiting debt/liens in CASH at closing. They don't have the cash, so they don't sell for a mkt price, and the owner's best option is the live in the house payment-free until eviction, and then let it go to foreclosure.</p>
<p>Here is a numeric example:</p>
<p>Purchase Price: $500,000 (irrelevant)</p>
<p>Existing Debt: $475,000</p>
<p>Market Value: $425,000 (net of selling costs)</p>
<p>Owner's Cash Payment to Lender at Close: $50,000</p>
<p>There is no way most people have $50,000 sitting in a checking account to pay off a home loan gone bad. So, they simply reject all offers by "preforclosure" buyers and let the house go back to the lender (while living in the house for 3 to 6 months for free).</p>
<p>This is simply the way I see it...am I missing something here or is there a way to actually make a preforclosure deal happen at market prices?</p>
<p>Thanks!</p>
<p> </p>
<p>Here is my question: Can anyone provide me a real life or realistic hypothetical example of a person making a "good buy" on a preforclosure home? Here is what I don't get...</p>
<p>Generally, a preforclosure has conditions where the market price (net of selling costs) is lower than the existing debt and/or liens on the home...right? If this were not the case, the distressed owners would simply sell the home and be done with it. </p>
<p>The way I see it is there is NO GOOD BUYING OPPORTUNITY on a preforclosure because the owner cannot possibly afford to sell at a market price due to the fact that they will have to pay off exiting debt/liens in CASH at closing. They don't have the cash, so they don't sell for a mkt price, and the owner's best option is the live in the house payment-free until eviction, and then let it go to foreclosure.</p>
<p>Here is a numeric example:</p>
<p>Purchase Price: $500,000 (irrelevant)</p>
<p>Existing Debt: $475,000</p>
<p>Market Value: $425,000 (net of selling costs)</p>
<p>Owner's Cash Payment to Lender at Close: $50,000</p>
<p>There is no way most people have $50,000 sitting in a checking account to pay off a home loan gone bad. So, they simply reject all offers by "preforclosure" buyers and let the house go back to the lender (while living in the house for 3 to 6 months for free).</p>
<p>This is simply the way I see it...am I missing something here or is there a way to actually make a preforclosure deal happen at market prices?</p>
<p>Thanks!</p>
<p> </p>
