preREOs can either be vacant or occupied and while they’re all non-performing, there are some differences in the process you need to understand. Some would go all the way to foreclosure, some would require modifications, and you have to be prepared for them.
Watch this video to better understand the differences between vacant and occupied properties on preREO so you know how to deal with them when you buy them!
Key Talking Points of the Episode
[00:00] Introduction
[00:14] Vacant Properties
[01:00] When to Request for Receivership
[02:02] The Risks of Keeping Properties Vacant
[03:14] Benefits of Having a Receiver Appointed
[04:31] Occupied Properties
[05:11] How Modifications are Approved
[06:10] Reselling Modified Mortgages
Quotables
“A vacant property, basically the family is gone, and that means the likelihood of it going all the way through to foreclosure becomes very high.”
“If there’s a property that’s vacant and there’s no consensual deal to be had with the homeowner and the foreclosure is more than six months away, then we highly recommend that you consider appointing a receiver.”
“If the court appoints a receiver, then the receiver is typically empowered to do 2 primary things – number one is to make the property rent ready and number two is to get the property rented.”
“That way, you could be continuing with the foreclosure but you’re collecting rent. Now the rent is going to the receiver, probably going to the servicer, and may not be coming to you, but it’s coming to your benefit.”
“Vacant properties will attract 2 things – property deterioration, they’re just not being as well taken care of as occupied properties and number two, vandalism.”
“That property will likely deteriorate and the lender is gonna have to advance the money to pay for grass cutting, keep the property secure, and whatnot.”
“If they sell that mortgage to you and you have a receiver appointed, the receiver can rent that property and now it’s being taken care of.”
“This family is likely to want to stay and even though they’re behind on their mortgage, probably because they simply couldn’t afford it, now they may be more receptive to a modification.”
“A lot of times the mods come with a decent-sized downpayment, so you get some money upfront and if they default later, at least you gave them the opportunity to probably pick up some money.”
“In my experience, if you were to buy 10 preREOs, half are occupied and half are vacant, the vacant are almost all destined for foreclosure, but the 5 that are occupied, maybe 1-2 will modify, but the other 3 will probably get lost to foreclosure.”
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