Many people have little idea about how foreclosures work. The lack of understanding in the foreclosure market leads to false beliefs that may contribute to the owner making bad decisions about his property. Even the lender’s lack of knowledge about the subject may greatly affect his business in a bad way.
Here are some of the myths about foreclosures and the truth behind them:
MYTH 1: Lenders want foreclosures to happen
Many buyers think that foreclosures greatly benefit the lenders, and thus are doing it on purpose. In reality, nobody really likes the process. For the lender, foreclosure is considered as his last resort to recover his investment. Once the owner defaults on mortgage payment, the lender needs to file a public default notice to provide the owner a grace period to settle his dues and avoid foreclosure. Only after the end of the pre-foreclosure will the lender be allowed to auction off the property.
MYTH 2: Buying foreclosed properties is only for professional investors
A long time ago, only those who were believed to be experts in real estate and property investment could succeed in turning foreclosed properties into a profitable investment. Nowadays though, with modern technology and various resources available, even newcomers in such a market can learn and be equipped with the necessary skills and tools on how to properly practice the trade. There are even various websites which offer a database of properties up for auction. These websites also provide a guide on how to choose the right property, along with other relevant information.
MYTH 3: Financial irresponsibility causes foreclosures
Even though there are some cases that financial neglect is what caused one’s property to be foreclosed, it is not always the case. There are many factors that may contribute to the owner defaulting on payments such as poor economy, job loss, incidents beyond their control and accidents, etc. Also, when the interest rates go up, some buyers have a hard time adjusting to the terms and find themselves in a sticky situation, hence foreclosure may take place.