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Home » Family Articles » Common Reasons People Go Into Foreclosure

Common Reasons People Go Into Foreclosure

If a family loses their home in Foreclosure, it is easy to critically speculate and assume that they must have been irresponsible with the loan payments or they bought a home way out of their league. Despite the fact that those are possible reasons for foreclosure, truth be told that there are many other reasons people foreclose on a home and many times it is out of their control. For any reason that a person or family forecloses on a home, there is always hope and someone to help. This is why it is necessary for knowledgeable and equipped investors to be on their toes, ready to help those in pre-foreclosure or those who already are in foreclosure. Those who have defaulted on a loan could have suffered from any of many life changing events, such as the following:

Divorce. Divorce is a life changing issue and a split in a household can cause people to lose their home in foreclosure. A frequently used statistic today is that one in about every two marriages end in a divorce, and sadly it's true. Divorce is undeniably a reality of our society today. Depending on who keeps the house is the determining factor of who will take over the monthly dues of the house. Unless arrangements are made in a prenuptial agreement, it is not a given who becomes the home proprietor and the legal process of a divorce takes time. The cost of a divorce itself can be the main cause of losing a home in foreclosure. Poor communication in a divorce is a factor which leads to unintended negligence and defaulted payments as well. Naturally, there are many different divorce scenarios that lead to home foreclosure.

Medical Reasons. Unexpected illnesses lead to a surplus of uninvited bills and many people can't afford these expenses or do not have the insurance coverage to save them. Nobody plans to foreclose on their home, just like they do not expect to pay thousands of dollars in hospital bills. Ideally saving money out of each paycheck to cover potential medical expenses would be great, but that is not always an option. Many Americans live paycheck to paycheck, barely making the home loan payment. When a medical emergency happens within a family, the monthly mortgage payment is put on the back burner. Reason being that an illness can cause emotional stress, or disable someone from working (which leads to the next topic...)

Job Loss. Job loss is a frequent cause of home foreclosure. The economy strengthens and weakens, and in conjunction with that the workforce moves up and down in numbers. As the unemployment rate goes up in a city it is safe to assume that foreclosure numbers will raise as well. Again, ideally one might hope to have saved enough money over the years to cover the home loan, credit card bills, electricity, etc in the case of job loss. However, this is not a social reality. The many Americans who have suffered job loss cannot pay monthly dues and they result with a default home loan, fall in to debt, and in many cases are foreclosed on by their mortgage lender.

Death. Death is single handedly the most detrimental happening for a person or family. Death can, in many ways, cause a family to lose everything...including their home to foreclosure. Take for instance, if the sole provider of the mortgage payments has died, then it is very likely that the rest of that family will lose their home in foreclosure. Unfortunately, the other spouse may be disabled or unable to work and sadly that person is in a seemingly out of control situation. This is where a qualified investor specializing in foreclosure will step in and help him/her get control again.

The reason a person or family goes into foreclosure is important for all to understand. As a homeowner one can be prepared for such a situation as the aforementioned, and as an investor, one can be informed as to what causes foreclosure and how to be of service. Death, job loss, medical expenses, and divorce are a few of the most common reasons people foreclose on a home. These factors are real and an everyday part of society.

And here is another random article you might be interested in...

Real Estate Investing--Starting Right Is the Key to Profits

You've heard of the potential payoff from real estate investing. The good news is, it's true! The bad news is, it won't happen for most people. Why? They have unrealistic expectations. Real estate investing isn't a "get rich quick" endeavor, although it sometimes happens. No real business is. So, prepare to make a serious time commitment. Would you expect to become extremely wealthy at anything in just a few months? Know that you'll have to keep learning, keep getting contracts, and keep putting time into it.

Still in? Great, you're a realist! Your first step is to choose an area to focus on. Do you want to purchase run-down properties and repair them to sell for profit (rehabilitate, or rehab them)? Do you want to buy properties and turn them quickly (flipping)? Maybe you want to buy properties, then lease them to potential buyers with an option for them to purchase them later, while you accumulate equity. There are pros and cons to each of these, depending on your financial position, your location, your available time, and other considerations. We'll be going over them all in future issues of the newsletter. You'll find the possibilities exciting.

Once you know what you're looking at draft your plan IN WRITING. People who do this get three times as much done in the same amount of time. Set long-term goals for 3, 5 and 10 years out for what you want your cash, equity, and cash flow to be. Then, you can work backwards from there to set 1-year, 6-month, and 3-month goals. Without this, you'll be driving without a map, taking or skipping deals without regard to how they fit into your big picture. Leaves lots of room for "Wish I'da's...." Don't do it! You can always adjust your plan as you go along.

Keep your day job for as long as possible. If and when it seems time to go, before you do, get some of those low- to no-interest credit cards that are out there. It could really ease some cash flow worries to be able to tap on a $10,000 line if you're doing a fixer-upper and run into an unforeseen problem with no additional bank draw in sight.

Get an attorney who knows and understands the creative options of real estate. Some banks just don't understand simultaneous closings, for example; you'll want your lawyer to know how to smooth things so that there aren't any snags that cost you time and money. Some even have their own title companies. A good place to ask for a referral is to ask a mid- to large-sized developer. This is one place not to haggle about price; he or she will be worth their weight in gold when they can get your deals done and you know that you can sleep at night because it's been done quickly and right.

As soon as you decide to get into real estate investing, begin building your list of buyers. We'll be covering more on this later; but, when you meet them, learn as much as you can about the kinds of deals they do, how long it takes them to conclude a deal, and so on. Most people love to talk about how they became successful, if you ask respectfully and don't waste their time.

Warning, warning! Think very long and hard before taking on a partner. If you do, it should be somebody who brings something to the party that you don't have, and it should be for one deal only until you see how things go.

Which brings us to how to set up your company. You should set up a separate corporate entity for each deal. An LLC is cheap and easy to set up. Land trusts are even better, because your name isn't personally in the public records, inviting some chump to sue you. The idea is to keep your personal assets off the table if something goes wrong. Talk with your attorney about it; he has forms that can have you done in a few minutes.

Finally, if you've made your plan, you have to work it to get anywhere. If you're not out there making any offers, you're never going to close any deals. No deals closed, no profits. If you're not making any profits, you're not in business, you're dreaming. Set a number of deals you're going to bid on per week and per month, and then get out there. Make it happen!