How to Survive A Bank Foreclosure Crisis By Joseph B. Smith

A collapse of the subprime mortgage market, like the one which happened in 2005, will certainly cause much damage in the housing industry. The resulting foreclosure crisis is definitely something anyone would be concerned about whether you are a homeowner or a real estate investor.

The effect on the market is very much palpable. You can expect home prices to go down and home sales activity to become sluggish. Even the home building industry will experience a decline in demand as there will be fewer home buyers looking for new homes.

Surviving such grim housing scenario can be a challenge. Here are some tips which could help you get through this essentially unscathed and even, profitable.

For Homeowners

Avoiding a foreclosure should be foremost on your mind during tough economic conditions. On the onset, you should make sure you can afford your home even if you suffer from unexpected circumstances like unemployment, medical emergency or divorce. As much as possible, save money for the rainy days.

If you think you can no longer afford the home, put it up for sale even before you commit mortgage default. Or, you can always ask your lender to modify your loan or agree to a short sale if you find yourself underwater on your mortgage. Worst case scenario is you go through a foreclosure and in order to avoid leaving your home, you can negotiate with the buyer to let you and your family stay in the home as renters.

The important thing is you remain proactive and not simply sit around and wait for the foreclosure notice to arrive. There are plenty of options to choose from to stop foreclosure and it is up to you to find out which one works for your situation best.

For Home Buyers

The unfortunate situation distressed borrowers will find themselves in is, fortunately, something you will profit from. As you know by now, foreclosed homes are much more affordable than other existing homes for sale. You can purchase one for half its current market value, which means not only savings for you, but instant home equity as well.

There are actually several profitable ventures which you can explore after the purchase of foreclosure homes. First, you can choose the buy-and-re-sell investment strategy, which allows you to enjoy return almost immediately. Of course, you need to have a ready buyer, so you will not be stuck with the property indefinitely.

Second strategy involves a buy-and-flip move, wherein you will need to renovate the foreclosed house, so you can sell it a higher price, even at market value, allowing you to enjoy considerable profit. Another option you can explore is the buy-and-hold technique, which involves choosing to sell the property when its market value appreciates.

The last option involves the purchase of repossessed homes for the purpose of converting them into rental units. This will allow you to enjoy positive cash flow and considerable profit over a period of time.

The foreclosure crisis need not be the end, but the start of something better. You simply need to be aware of what is happening around you, so you can respond to these changes accordingly. Also, be on the lookout for investment opportunities only such a situation can create.

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