In understanding the recovery of the market it is important to look at the factors that resulted in the current real estate market slump. There are actually several factors that led to the current slump. One of the most important factors is the fact that prices in several areas throughout the country doubled between 2000 and 2005. In some cases, those prices even tripled. As a result, there were a record number of people who were unable to afford homes, especially first-time home buyers. As the number of buyers able to purchase real estate began to dwindle, resulting in price and sales declines throughout the country.

As headlines have proclaimed recently, subprime loans also contributed to the recent debacle. During the last few years, a large percentage of the number of loans that were made were issued to buyers with credit scores that were below average. Additionally, a large number of loans were made to buyers with minimal down payments. Approximately two years ago real estate prices stopped rising. At this time, a number of buyers who had snapped up houses in red hot markets suddenly discovered that the balance of their mortgage exceeded their home’s values.

The rate of defaults began to escalate at this point. Before long, foreclosures also began to increase as a direct result. As more and more foreclosures hit the market, the inventory in many markets began to spiral out of control. As more homes hit the market, prices began to drop even more. To make matters even worse, economic growth began to stall and massive layoffs in many areas further fueled defaults and foreclosures.

While it has taken some time, assistance is now being provided to homeowners; which is anticipated will help to stave off the increasing rate of foreclosures. Overall, this is anticipated to help stabilize the rapidly rising inventory of homes for sale throughout the nation.

It is important to keep in mind that while headlines appear to be constantly blasting news about the softening real estate market, there are actually some markets in the country where prices have continued to rise rather than decline. On average, real estate prices nationwide are approximately 5% less than they were last year; however, many of the metro areas in the nation are still experiencing price increases. This is largely due to first-time home buyers who can still afford to purchase properties and retiring homeowners who are selling their home sand then either moving into a retirement community or purchasing smaller properties. These markets include Salt Lake City, Utah; Charlotte, North Carolina; Beaumont, Texas and Bismarck, North Dakota.

A foreclosed property can be purchased at several different stages and sometimes they get auctioned off at an actual auction. There are several reasons why it would end up being sold this way:

1. The debt on the property is so high that if purchased before the auction there wouldn’t be any profit potential

2. The seller wouldn’t sell before the auction

3. The seller can’t be found

4. You have more cash on hand than time

Anyone wanting to buy foreclosed properties at an auction should attend a few to get familiar with the way they work. They do present some great opportunities but some trappings as well. Some things you can expect are:

They are over very quick. You can be a few minutes late and miss it. Like any other auction there can be more spectators than qualified bidders so you can have the auctioneer verify everyone’s qualifications by showing the required certified check before the auction starts. This way you know that the person you’re bidding against is actually qualified to raise a bid and cause you to lose real money.

Any serious bidder must do thorough research on the financial situation of the property. You could bid up to $375,000 on a property valued at $500,000 and think you got a great deal then find out there was a $150,000 1st mortgage still in place. Knowing about this 1st mortgage you could verify your bid to be “above the 1st” and not “subject to the 1st” and so your bid would be from a base price over the 1st mortgage.

If you are the high bidder on a 2nd mortgage you can take over a 1st FHA or VA assumable loan. If the bank is the highest bidder on a 2nd they can substitute you and lend you the FHA money. The bank is usually the high bidder especially in states where auctions require all cash deals. Sometimes a private investor is the high bidder and sometimes the auction can be postponed all together.

Some things you need to know:

Depending on the state you are in, cash needed the day of the auction is 10% to 100%.

If you bid and win, then change your mind after putting down the deposit you can forfeit your deposit and be held liable if you change your mind.

Verify the bank’s bidding instructions to the auctioneer because a lender may bid substantially less than the debt they are owed. The rules and laws vary from state to state but you can get much of the information on your local foreclosure procedures and bidding instructions from the sheriff’s office or the court office clerk. Foreclosure properties can be a great way to make some very high profits in real estate in a short time but you must take the time to learn how to play the game and due the required research or else it can be a great way to lose money too!

Foreclosure is a legal procedure by which a borrower’s rights to a mortgaged property may be ceased because of failure to maintain mortgage payments. The lender can acquire ownership of the property for which the loan was originally issued in case the borrower fails to live up to the obligations agreed to in the loan contract. The lender may foreclose on the loan and declare the entire debt that is due. Foreclosure is commonly conducted by a court-decreed sale of the property to the highest bidder, who is often the lender. The highest bidder has the right to sell the property at public auction and collect the debt from the proceeds. When the process is complete, it is typically said that “the lender has foreclosed its mortgage or lien.”

Foreclosure procedures differ from area to area. Individuals involved in the financial claims against the property such as second mortgages, mechanic’s liens, judgments, etc. do not get compensated at all. Also, if the auction results in gaining additional money than required to pay the foreclosed loan, back taxes and legal costs, whatever is remaining would then go to the original owner. Usually, the mortgage holder can start foreclosure anytime following a default on the mortgage. Foreclosure via a judicial sale involves selling the mortgaged property under the supervision of a court. In this case the proceeds will first be used to satisfy the mortgage, and then to satisfy other lien holders, and finally to the mortgagor. Similarly, if the sale of the property is done by the mortgage holder without the court’s supervision, proceeds from the sale go first to the mortgage holder, then to other lien holders, and finally to the mortgagor.

A foreclosure property can be bought from the offending property owner before it is auctioned out, or by buying a pre-foreclosure deal or buying at the auction. In case nobody bids, the lender becomes the owner of the property. Foreclosure investing can be very profitable.

It is not uncommon for many couples who are divorcing to sell the family home so they can take the proceeds of the home and then go their separate ways. As the number of homes sitting on the market in most areas continue to climb; however, most couples are finding it difficult if not impossible to sell their home. When the home does not sell, this has a direct correlation on the cash flow for the couple. A number of areas are impacted as a result including child support. Quite surprisingly, this problem is even impacting where divorced couples are able to live once the divorce becomes final.

As a result of these problems, there has been a significant rise in a trend known as post-marital cohabitation. While in the past it was practically unheard of for couples to continue to live together following their divorce, many people today are finding they have little choice when they are not able to sell the family home. Quite simply, they cannot afford to live anywhere else until the family home is sold.

As the average sell time for most homes increases, this means that many divorced couples may find they must continue to live together for several months; in some cases a year or more. Older couples who are living on a fixed income are finding this to be a particular problem as are couples with young children. In the case of the latter, the only options they can afford are simply too small for the size of the families.

In situations where couples simply can no longer abide living with another, they find themselves forced to live elsewhere even if it means moving in with family members.

Regardless of the situation, couples in such situations find they have limited options available to them. In situations where the couple is upside down because the value of their home fell after the housing boom ended, they must decide whether it is better to remain in the home until the market improves or try get out with a short sale. Other families are finding themselves facing foreclosure when they simply are no longer able to make mortgage payments.