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Why Do Foreclosures Happen?
| | Sunday, September 14, 2008 @ 09:53 PM EDT
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Contributed by: Jeff Adams
Jeff Adams Properties
Read more archived articles about Foreclosures
Real Estate and foreclosure expert, Jeff Adams, explains why foreclosures happen.
So much attention has been given lately to the number of foreclosures that we should expect to see in the United States over the coming years that few people have stopped to consider why exactly foreclosures happen in the first place.
I am going to be a little glib here and say there are about as many reasons why foreclosures happen as there are home owners defaulting on their loans but that would not help answer the question so I am going to take a more general view and see if the reasons a foreclosure happens can be fitted into different categories.
So let’s take things from the beginning and see if we can form a good picture. The obvious answer of course is money, or rather the lack of money. But the reason a home owner who has attained the Great American Dream of buying his own home can no longer afford it is a lot more complicated.
Broadly speaking the reasons area: 1. Ill-Health. A change in the health of the family, an accident, serious illness or anything similar can so adversely affect the finances of a family that they then begin to go into a tailspin and that can very easily lead to missed mortgage payments and foreclosure.
2. Loss of a job. This is common and it only leads to foreclosure if it is so catastrophic that it places the home owner in a new income bracket where he is unable to get another job equal in pay to the one he has lost.
3. Bad finance management. This is more serious than it may at first seem and it does not reflect just on the home owner. Quite a few home owners took advantage of adjustable rate mortgages (ARMs) which allowed them to buy a home and borrow money at very advantageous rates which, however, after six months or a year began to sky rocket and the rest is history. Here the fault often lies with lenders who make it difficult for borrowers to understand what they are getting into and, which, have over the past year been found guilty of using high-pressure tactics to sell mortgages at any costs.
These three reasons, collectively account for more than 90% of the foreclosure cases that we see come into the market.
It is evident from them that foreclosures are never a cut and dried affair of someone being unable to make payments and left to themselves, they never really manage to get out of this morass. It is exactly at this point that the savvy real estate investor steps in and acts as a catalyst in a situation that often finds him creating a win-win scenario for everybody and that is what is satisfying about being involved in the foreclosure market.
Jeff Adams
Note: This article was written by Jeff Adams, a national author, speaker and trainer who has done over 350 deals over the past 12 years. http://www.FreeForeclosureCourse.com
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