Archive for June, 2012

Originally posted 2011-12-22 04:39:20. Republished by Blog Post Promoter

There are times when a loan might suffice for paying off your debts, but there also are times when they won?t do well for that. It is all up to you, really; how you plan to spend your loans, what you plan to do with them. I would only suggest that you ensure that your life is better for it, and nothing less.

I would not advice that you take a loan to pay off your credit cards. As far as I am concerned, that is one loan to cover another, and you get to remain in the same rat race. If you will take a loan, be sure it breaks you away from the race, not dig you deeper into it. When taking out a loan, you might be required to list your assets, and also provide the reason why you need to get that loan. You must convince the lender to bet on you. When they do is when you get paid; not a certain.

What your loan will be used for should be determined well before you even apply for it. It would be irresponsible for it to be in any other way, unless what you are looking to do it actually bury yourself deeper in debt. I?m certain you can understand that.

Loaners need borrowers to remain in business. The fact that the United States sports so many loaners tells us that a lot of Americans also are borrowers. It makes me think that the industry is not going anywhere anytime soon.

Thinking about it will not get you anywhere; only decisive action can take move you forward. Taking a loan is a decisive process, and if you are still thinking about it at this time, you should stop already because you obviously don’t need it. If you did, you?d have the money in your account already.

If you need free money fast or want to become debt free today then you have come to the right place for that information. Feel free to check out our blog for the most up to date information on debt management and borrowing the money the right way.

How To Eliminate Credit Card Debt

Originally posted 2012-06-27 22:40:20. Republished by Blog Post Promoter

Over-bearing debt from credit cards is a dilemma that confronts a large percentage of individuals in the marketplace today. Using consumer credit cards can seem like a good idea when you initially get that offer in the mail. Having a borrowing limit that seems miles away, it’s easy to excuse that first shopping spree, or maybe buy that HDTV you happen to be eyeing. But a lot of us don’t bother to deal with aftermath of choosing to utilize credit cards over cash right up until it is too late and we are already sinking in unsecured debt. By then, it’s difficult to find the easiest way out. But learning about the best methods to get out of debt isn’t impossible. It’s not going to be easy, but it is feasible with some basic steps.

1. Balance Transfer Specials

If you find yourself holding five to six credit cards that are typically maxed out and you can barely afford to make the bare minimum payment, shifting the amounts to a single credit card can help to save you a huge amount of cash in over time. Since credit card companies are forced to continuously strive to compete in this global financial marketplace, many promote low-interest promotional rates on balance transfer offers, or even bonuses to get you to change to their company.

If you’re able to convert the account balances of your respective charge cards onto one card and then make only one monthly installment in contrast to five, the amount of money it will save you will be massive, particularly if you happen to be moving from a handful of high-rate credit cards to a solitary low-rate one. As soon as the account balances are successfully transferred, it is essential that you close your other credit card accounts, or risk racking up twice the amount of debt you accumulated to start with.

2. Do Not Make Just The Minimum Monthly Payments

Paying just the bare minimum payment demanded by your credit card company barely makes a dent in the monthly incurred interest, plus the principle and high account balances look harmful on your credit history even if you are making monthly payments when they’re due. It might not be possible to pay out double the minimum payments required particularly initially, nonetheless adding five or ten dollars on top of the expected minimum payment generally goes directly to the principle account balance and can reduce your debt much more quickly.

3. You Should Never Take Your Plastic With You

Anytime a credit card or two are conveniently tucked in your ladies handbag or billfold and it’s getting close to pay day, it really is enticing to pull them out for your restaurant bill or perhaps for happy hour with your coworkers. By keeping your credit cards safe at the house, you’re much less likely to use them.

Putting your credit cards inside a safe spot which is difficult to gain access to can lessen impulse spending. Try placing them in a sealed envelope, and then wrap the envelope with tape, or any other sticky material. They’re still there if necessary for an urgent situation, however it will take an effort to get them out. Some people actually deep freeze their own credit cards (quite literally) inside of a block of ice. These kinds of extreme precautions is probably not needed, but making them more difficult to access assures that you may think carefully before utilizing them.

4. Set up A Fun Budget

In the event that there are certain things available that have grabbed your attention that you really like, like a cutting edge phone or even a unique pair of athletic shoes, then try setup a savings plan for that product, as an alternative to instantly buying it using credit. Simply by putting aside money each and every pay day, rather than paying off a charge card bill plus interest, you can actually feel a sense of achievement.

By cutting back on impulse buys and leaving credit cards for the purpose of emergency situations, you’re likely to have money available should something unanticipated should happen. There’s no need to deny yourself the items you really want, but you should preferably try to save up some cash for them prior to purchasing. It won’t take as long as you’d probably believe, and you’ll feel better about yourself afterwards.

Consumer credit card debt is a significant problem facing huge numbers of people worldwide, and it’s easy to see precisely why it is typically so frustrating and aggravating.

Taking care of credit card debt responsibly by using these 4 tips can start the approach to utilizing good habits that let you use credit sensibly. Although it may seem unrealistic to manage at the start, paying down your credit card debt is not as challenging as it might seem. Simply by getting out from underneath the weight of overpowering your credit card debt, you can live a healthier and happier life.

Helpful Advice On Debt Management

Originally posted 2010-03-30 01:53:29. Republished by Blog Post Promoter

The stress caused from being in debt can be overwhelming for anyone to deal with. It is becoming more common for people to be living with debt today and the nation is feeling the pressure. With bills mounting and debt collectors calling, people are too scared to open their front door. There are ways to help solve all debt situations.

Contacting the companies you owe money to is the best step forward in helping with your debt situation, they may even give you advice on what you can do to make your situation better. Keeping in contact with them shows that you want to sort the problem out and they may be able to give you some helpful advice. This advice can help to give you a boost and help you take the next step to solving the issue.

Debt management is a good solution if you want to sort your debt problem out yourself, it is not a quick and easy process, it will require lot of hard work and determination from you. So how does debt management work? Firstly you will need to work out your monthly outgoings include everything, for instance – food bills, fuel or any other necessary items you may have.

When everything has been worked out, even if you still have money left, you need to work out what you are overspending on each month, it is vital that you are completely honest with yourself. If help is needed along the way, you can seek advice from a debt management advisory company. The company will help to devise a plan for you, however they can only talk you through it, that is where it ends, you will have to put in all the hard work and perseverance yourself. The knowledge you gain from this experience can help prevent you getting into debt in the future.

If you find that you have no money to play with at the end of the month and your income is not covering your debts each month, you will need to search for other solutions. There are a selection of loans to choose from. If you have a property or something of value, you could look at getting a secured debt consolidation loan. The borrower usually saves a lot of money with this type of loan, the interest rate is lower, because there is not as much of a risk to the lender.

An unsecured debt consolidation loan is normally given to people who do not have collateral to use against the loan, an unsecured loan is not as easy to obtain particualy if you have a less then average credit score. An unsecured loan normally comes with a high interest rate because they are more risky for the lender. This type of loan can still reduce your monthly payments considerably, it just means you would just be paying it back over a longer period of time

In Conclusion

Looking to obtain any type of loan should be taken seriously, if you can manage the debts by yourself, it will benefit you in the long run. Choosing this option can be very rewarding as, all the hard work you put in will have paid off and you can see the results. If you are looking to consolidate your debts with a secured debt consolidation loan it is vital to make sure you can afford the monthly repayments, if you can’t there is a possibilty you could lose your collatral.

Steve Smith writes for allaboutloans where we offer all kinds of debt help, from individual voluntary arrangements IVA’s to debt consolidation loans. Visit Today

Article Source: ArticleSpan

Originally posted 2012-02-05 00:13:52. Republished by Blog Post Promoter

You’ve seen the ads, you’ve called for debt advice, and you’ve had many sleepless nights and decide that a debt management program is an answer to your prayers. Signing up for a debt management program will direct all of your creditors to stop calling, will cut your payments and outstanding by half, and magically erase your debt within 5 years. Or so the ads say.

When the bloom is off the rose and reality sets in, a majority of consumers will realize that their predicament is now much worse.

Typical Debt Management Programs will help you wipe out your debt. You will have to file bankruptcy to do it, but who really bothers with the fine print anyway?

There are a handful of different types of Debt Management Programs. The one advertised the most is Credit Card Debt Settlement.

The issue with most Debt Settlement Companies is that they over sell Credit Card Debt Settlement. The strategy itself can actually be very effective for consumers, but it should only be used in the right sets of circumstances.

Seasoned Credit Card Debt Advice to help determine if Debt Settlement might make sense for your financial situation.

1. You can no longer or barely afford to make your monthly payments.

2. You feel that an interest rate reduction or a credit counseling program is not going to provide enough relief to solve the problem.

3. You have met with a bankruptcy attorney and realized that you would not be able to file a chapter 7 bankruptcy.

4. You have a lump sum or will be able to save up enough money within a reasonable time (2 years) to settle your debts and satisfy your creditors.

5. You are aware that stopping payments to your creditors might result in court action.

6. Getting rid of your debt is a higher priority to you than preserving your credit rating.

7. You are willing to deal with creditor phone calls asking for money.

This is just some general Debt Advice to keep in mind when looking into Debt Settlement or other Debt Management Programs. The reality is that every debtor should have a professional review of their entire current and potential future financial circumstances. Things such as your age, your earning potential, your assets, your retirement savings, your future credit needs and much more, need to be considered.

Originally posted 2010-02-26 18:31:20. Republished by Blog Post Promoter

With so many people in debt and feel that they can’t get out, one would think that they would search every angle and avenue to get help. The more debt a consumer has, the more their credit suffers. Some of them are scared to contact their creditors to negotiate payments. They are afraid that the creditors will turn against them. However, companies such as credit repair services are in business to help those that need assistance in credit repair.

There are some free credit repair services out there, but you have to find the right ones. There are some legitimate companies that specialize in credit repair. Some of the legitimate ones, whether free or paid will work with you to correct and clean up your credit. There are some that will go as far as helping you to set up a budget so that you will be able to rebuild your credit and increase your credit score. This is a great benefit that no consumer should want to pass up.

There are companies that have credit repair services that offer debt consolidation. They will work to get you a loan so that you can pay off your creditors. If you have a lot of credit card or charge card debt and robbing Peter to pay Paul, debt consolidation may be a form of credit repair that can work for your situation. After your debts have been consolidated into one, you will start making one payment instead of having scattered payments. It can be difficult to keep up with the individual payments for your debts.

Another way to work toward debt freedom is to have an installment loan. The company that specializes in credit repair services will work with you to see if a secured or unsecured loan would work best for you. With a secured loan, collateral is involved. This could be your vehicle or your place of residence. An unsecured loan doesn’t require collateral but you will have a high interest rate. With your credit repair program, having this type of loan will help you to rebuild your credit history.

Companies that offer credit repair services can also help to remove negative information from your credit report. They will dispute items that are on your credit report that should not be on there. These items may not be correct, inaccurate or outdated. The creditor is responsible for responding to the dispute. If they do not respond in a timely fashion, then the item is supposed to be removed from your credit report. This part of the credit repair process will help you to increase your scores quickly.

The company that you are receiving credit repair services from will also contact your creditors by phone and mail in order to make negotiations in regard to your credit report. This is also a part of your credit repair program. Doing this yourself can be a headache and not get you very far, so hence the reason the credit repair company steps in to intervene.

Credit repair services is a good way for consumers to get back on the right track Having someone that is trained in credit repair can help you to get the credit score that you need. Having good credit is so important that it’s a good idea to have someone help you to get it back up to speed.

This article was brought to you by Joseph FeRoss and the credit repair team and MSI credit. For more information on credit repair services please visit

Article Source: ArticleSpan

Originally posted 2012-01-02 01:22:31. Republished by Blog Post Promoter

Trust Deeds

After you arrange a Trust Deed your Insolvency Practitioner is needed by regulation to put an ad while in the Edinburgh Gazette. It is in distinction to standard financial debt repayment schemes that happen to be confidential. Understandably, quite a few persons are terrified that close friends and neighbours will probably be capable to search out out about their finances and also the Trust Deed, which notion of social stigma is extremely challenging to shake.

However, there exists truly almost nothing to fret about.

The Edinburgh Gazette is really a very specialised bulletin particularly arrange to publish info and legal notices and it is actually almost nothing like an everyday newspaper such as the Moments or even the Day-to-day Mail. It. It really is revealed 2 times weekly and circulated to loan providers, persons performing while in the regulation business, libraries, scientists as well as other in identical legal and informational roles. Also, you will find a subscription to buy – now nearly ??ninety – which can be a great deal costlier than an everyday publication (and also a fantastic offer a lot less appealing!). It is not a little something you will discover casually lying about in waiting around rooms to get thumbed via or simply on the store shelf.

But imagine if an individual you realize did handle to obtain maintain of the duplicate? Unquestionably it will be considered a easy issue for them to search out your ad? Properly when they by some remote probability pay money for a duplicate they will be confronted with serious eye-glazing things! The Edinburgh Gazette is split into many unique groups collectively include hundreds of notices and commercials, as an example Parliament, State, Manifeste Finance, Providers & Economic Regulations, Exclusive Insolvency, Corporate Insolvency, Partnerships, Post & Telecom, Exclusive Legal, Societies Regulation, Ecclesiastical, Health, Planning, Environment, Water, Energy, Agriculture & Fisheries etc. In each individual of these groups are sub-categories of notice type and that’s where they would have to particularly look for notices about Protected Trust Deed.

Unless it is actually your job to keep up along with the legal and money notices about Trust Deeds, it is actually very unlikely anyone will bother to trawl via the Edinburgh Gazette looking for your info. It can be even a lot less very likely that one particular of your family or neighbours would bother to obtain a subscription around the off-chance info about your finances might appear in it.

So How Considerably Details Do The Adverts Reveal?

It can be understandable you could be concerned about how a great deal info the ad might include about your money difficulties, but they in fact include a great deal a lot less than you think. There is certainly no info about the amount of financial debt or even the reason behind why you have Trust Deed, the ad follows a quite general form. All the ad is performing is letting your Creditors know what is happening and that they have 5 weeks to submit a claim to the Trustee for non-payment of your debts. Whenever they do not do so inside 5 weeks and your Trust Deed becomes protected, they lose the right to pursue you for the financial debt when the Trust Deed is running.

The Adverts Follow A Incredibly Equivalent Format Virtually Identical To This:

“Trust Deeds are already awarded by Trust Deeds Scotland, Scotland, and previously residing at [your previous address], and previously residing at [your previous address], on [date the Trust Deed was set up], conveying (to the extent specified in section 5(4A) while in the Bankruptcy (Scotland) Act 1985) their estates to me, [name of your insolvency practitioner], as Trustee for the benefit of their Creditors generally.

“If a Creditor needs to object to the Trust Deed for the purposes of preventing them becoming Protected Trust Deeds (see notes below around the objections needed for that purpose) notification of these types of objection must be delivered in writing to the Trustee inside 5 weeks in the date in the publication of this notice while in the Edinburgh Gazette.

“Notes: The Trust Deeds may perhaps turn out to be Protected Trust Deeds unless throughout the period of 5 weeks in the date of publication of this notice while in the Edinburgh Gazette a majority in number or not a lot less than one particular third in value in the Creditors notify the Trustee in writing that they object to the Trust Deeds and do not wish to accede to them.”

Not the most riveting of commercials is it! And it is actually not very likely to draw a great deal attention from anyone other than your creditors.

Originally posted 2010-02-05 02:01:03. Republished by Blog Post Promoter

So, what is the best debt consolidation company available to those that are in dire need of the help of such professionals? This question is can be a difficult and complex one to answer because there are so many companies out there. It would be impossible to catalog them all and to determine which one is the best.

And really, the "best" debt consolidation company is one that can effectively handle your case and deliver a reliable and expected outcome. That means when you look for the best debt consolidation company, you will want to look for the service that is reputable, reliable, and delivers on all its promises. This means you need to perform a little research first.

Here is a tip that may prove helpful when seeking the best consolidation company. Look at where the company advertises. Does it advertise on a major radio program or television network? Has it been a sponsor for a long time?

If the answer is yes on both counts, this might be a decent company. There is no guarantee but most reputable media outlets will steer clear of dealing with advertisers that are a scam risk. It would just be too embarrassing to them to have such a problem on their hands.

And speaking of scams, it is best to look over the Better Business Bureau (BBB) index to see if any complaints have been filed. While even decent companies will have some complaints (you can’t please everybody), it is the number of complaints that matters.

Any company trying to credibly claim it is the best debt consolidation company in the industry will not be one with a high number of BBB complaints against it. Steer clear of such services because they might prove to be far more trouble than its worth.

Running a check of the debt consolidation service’s name in the search engines is another way to see what others are saying about it. If there are a ton of negative sentiments and complaints about the company, it is probably best avoided.

On the flipside, if there are a number of positive statements made about a particular service then it may be one well worth looking into.

The terms and conditions that the service puts forth need to be examined to ensure they are honest and fair. You certainly would not want to sign on with a debt consolidation service that presents difficult terms and conditions.

The same can be said of those debt consolidation services that charge outrageous fees or operate in secrecy. You want to stay away from such less then reputable companies when seeking the best debt consolidation service.

There are a number of excellent services out there that can help you consolidate debt and in a manner that will not prove too difficult. The best debt consolidation company for your needs is out there. You just need to find it.

Need to restore or build credit fast? Discover what banks, credit bureaus and other creditors don’t want you to know! Now check out the top rated credit repair programs at: David Kamau offers free credit repair tips and strategies at:

Article Source: ArticleSpan

Guidelines for Avoiding Personal Bankruptcy

Originally posted 2012-07-19 00:44:46. Republished by Blog Post Promoter

If perhaps you are caught within a phase of credit debt, bankruptcy can appear like the only way out. Financial troubles may well cause such a lot of pressure, and your possibilities may seem intricate and hard. But there exists a plan of action that can assist to get rid of your financial issues and help you to sleep at night. Declaring bankruptcy will help you get your life back on track to help you to begin making the most of it once more. There are actually places you can get support with consolidating debt.

It is actually usual that sometimes individuals will need assistance to adjust to new situations or to visit a substitute fiscal solution. If you turn out in the red, you must be proactive and make a change right away. The sooner you act in response to financial troubles, the quicker are going to solved.

The foundation causes of financial troubles are frequently personal budgeting problems. Financial disaster is not an overnight incident. Commonly, the procedure of insolvency is going to be because of spending too much money habits and surprising life changes that in time develop into larger problems. Many people today will see that personal budgeting before could have made it easier for them to keep away from their own present financial situations. Over spending is an extremely easy activity. Credit cards permit us to maintain our chosen lifestyle even though financial resources are running low. Loans permit us to have the things we would like now, as opposed to saving for them sensibly with time. Credit card limits are often added onto our personal loans, which will will start the vicious circle. Next thing we know, we’ve obtained an unmanageable quantity of financial debt on top of our bad personal budgeting habits.

Personal budgeting has invaluable benefits. It would be the only way to seriously take control of your cash, ensuring you’re always living within your means. Personal budgeting affords protection for crisis situations or when a life change develops or anything goes wrong. It is the ideal strategy to plan for and achieve long term objectives and requirements.

Here are some ideas for profitable personal budgeting.

1. Have an emergency fund.
Financial debt frequently originates from a sudden large cost such as a auto repair or even a medical expense. If you don’t have the cash you can naturally charge the price to your credit card. Having an emergency fund can help to keep away from credit card debt in these disaster conditions.

2. Only charge what you can pay for
Stay away from the error of utilizing a credit card to get items you really can’t afford. If you can’t manage to pay cash, you can’t manage to charge it. You can steer clear of credit card debt without difficulty by buying merely what you might manage to buy.

3. Pay your credit card by the due date and in total
If you want to hinder credit debt, be sure you do not overlook any payments and completely pay down the account balance monthly completely. That way, you will not carry a balance and this will stay manageable. You will probably reduce the pressure of whether or not you’ll be able to meet the minimum repayment because your credit card is paid completely.

4. Know signs of credit card debt
Understanding the signs of credit card debt is a vital part of preventing personal debt. Many folks will end up with credit card debt when they failed to realize they were on the way. If you understand the indicators early on, you can easily avoid going into personal debt overall.

Signals consist of:
• Using the credit card to fulfill basic requirements
• Transferring balances in order to avoid credit card installments
• Skipping payment of one credit card monthly bill to pay another
• Avoiding or ignoring credit card statements
• Charging higher than you repay

5. Avoid cash advances
Cash advances are amongst the absolute worst purposes of your credit card. If you’re employing your credit card to obtain cash out, this is often a powerful sign that there’s a problem with your financial situation. Work on improving your budget in an effort to develop an emergency fund and banish cash advances along with credit card debt.

6. Limit your quantity of credit cards
The more credit cards you’ve got, the more you may charge. Even people that have wonderful self-control may be lured by this type of great credit limit. Reduce the number of credit cards you hold to cut down on spending in order to avoid credit card debt.

Perhaps even those that have a good credit past and track record of personal budgeting can easily slip abruptly in to credit card debt. Unexpected situations could lead to a change in income, an unsatisfactory investment decision or perhaps a strike of bad luck. Good management of your capital may be a very helpful instrument when these kinds of occasions happen. Personal budgeting plus an emergency fund together with the other helpful pointers provided previously will do amazing things to your finances. It is very important to take action immediately responding to credit card debt, to help you overcome your economic pressures promptly.

Originally posted 2010-02-13 16:47:30. Republished by Blog Post Promoter

A prudent and logical approach for business borrowers is to investigate the viable options for reducing current levels of small business bank financing and commercial debt because of serious deficiencies with commercial banking services now available to small businesses. A growing number of business owners are seeking business finance advice about how to reduce small business debt and commercial bank financing.

In most cases, the commercial lending struggle with banks is not one openly sought by small business owners. The increasing inability of banks and other business lenders to provide adequate amounts of business loans and working capital financing has produced this practical outcome. In fact over the years most commercial borrowers have probably viewed their business banking relationships on a friendly and loyal basis. Massive changes are literally forcing small businesses to examine and revise their business financing strategies, much as seen with many other business practices.

Evaluating whether there are realistic alternatives to replace their current bank financing and commercial debt would be one possible outcome for business borrowers. Refinancing business debt with a new commercial lending source would be a normal and practical result. For one example, exploring business financing options to obtain working capital financing elsewhere would be smart for a small business with a commercial line of credit that is about to be eliminated or reduced (as is now happening on a widespread basis).

It will be wise to explore small business finance alternatives even in situations where business owners are not being forced to acquire a new source for their commercial loans immediately. Very little notice has been provided to impacted commercial borrowers in most recent examples of banks which have revoked existing small business loans.

Small business owners analyzing whether it is feasible to permanently reduce commercial debt and small business bank financing is another effective business financing option. With this approach, commercial borrowers would focus on reducing their overall business debt rather than merely finding a new home for their small business loans. When done successfully, this strategy permanently decreases interest expenses for the business. It will probably also improve credit ratings for the business and the business owners, and this can improve interest rates on whatever amount of business financing might still be needed.

The strategy of permanently reducing business debt is one which is likely to grow in popularity for commercial borrowers. There is a refreshing trend among individuals as well as businesses to stop using the services of companies which mistreat their customers on an ongoing basis. As reflected in a review of a wide variety of publications, such mistreatment unfortunately appears to be common with small business lending providers. Since this disturbing trend is especially evident among larger banks, one small business financing option that deserves to be thoroughly evaluated is whether it is feasible to simply find a better and friendlier (and more effective) commercial lender. Certainly it seems that a worthy goal would be ensure that small businesses find a good (effective) bank to replace a bad (ineffective) bank to the extent that they find that they still need some bank financing.

Stephen Bush and AEX Commercial Financing Group provide help for working capital loans and small business finance programs:

Article Source: ArticleSpan

Investing in Distressed Debt

Originally posted 2010-03-15 23:59:52. Republished by Blog Post Promoter

Many sophisticated investors are now investing in distressed debt, including distressed real estate mortgages.

For example, John Paulson, who runs the $36 billion hedge fund firm Paulson & Co, is looking to buy distressed mortgages and distressed debt, despite being bearish on the overall economy, Bloomberg reported. Paulson wrote in a 2009 outlook to investors that he is interested in investing in debt restructurings, bankruptcies, strategic mergers and financial recoveries. Paulson’s opinion is entitled to great weight as he made billions betting the subprime market would crash and was one of the few to get it right.

Economic Outlook Favors Distressed Debt

Distressed investments are good values during bad business times and bad periods in the credit cycle where there is a bad economy, a bear market in stocks and increasing defaults. As we can easily see, distressed assets are now in favor. Conventional knowledge rightly suggests that in a period of economic contraction, debt, rather than equity, is a good investment strategy.

Risks of Distressed Debt

Distressed debt requires considerable expertise. Such debt is subject to serious legal issues, including possible bankruptcy proceedings, that require experience and expertise to successfully navigate.

Traps for the Unwary in Buying Distressed Mortgages

There are also several traps for the unwary in buying distressed mortgages. First, the buyer of a distressed mortgage may want to bring a foreclosure proceeding to take over the house. This inevitably will cost time and money. Depending on the local courts, and the willingness of the homeowner to contest the foreclosure, such proceedings can take as much as a year. During this time, there may be no income on the mortgage while taxes and insurance costs have to be paid. Legal issues, such as the inability to find the mortgage note in mortgages that have been sold into pools, may stall foreclosures. Some mortgage pools were improperly assembled and documented, making foreclosure difficult.

Further, during the foreclosure proceedings, a disgruntled homeowner may actually damage the home to spite the lender. In our market, we have reports of even homeowners of very expensive homes vandalizing homes by doing such things as painting "Screw First National Bank" on the walls and punching holes in them. At the least, the homeowner’s efforts at maintenance and repair will be minimal or nonexistent. The worst-case scenario is when the home is vacant, leaving it open to decay and vandalism. It is enough to give the distressed debt owner nightmares.

Adding to the nightmare is the fact that in many communities, the zoning and building code game is designed to help the local established contractors keep market share. In some communities, if the property is deemed to have a need of 40% or more of repair, the property needs to be rebuilt up to current building code standards, in effect allowing you no more than a physical shell that would require almost new construction. Thus, the lender or distressed debt owner has to act as though the property consists of only a piece of land.

Further, in certain communities with impact fees, the lender would have to pay an impact fee. Many older properties had not paid a fee and the local communities are looking for revenue. They may demand an impact fee be paid before allowing this "substantial rehab" to occur.

Also, many communities have six-month grandfather clauses that provide that if they can show that a non-conforming use has ceased to operate for six months, the community can deny a certificate of occupancy and demand the property be rebuilt up to current standards.

Bulk REO

We see many people chasing bulk REO properties where a bank is selling a pool of single-family homes they have foreclosed on. We believe that banks will tend to sell the worst properties they own in these pools, especially those that may have EPA problems, zoning problems, repair problems, impact fee problems or other problems. The buyer has a limited time to review these properties and may not be aware of the problems he is buying. While real estate is a business where knowledge of the local market is essential, some bulk REO pools contain properties that are spread out over dozens of states, making local market knowledge impossible and management of the property a daunting task.

Better than Distressed Debt

We believe that there is a better strategy than buying distressed real estate debt. We believe that the more you look at the real estate market, the more you start to realize that buying distressed homes can offer better returns with less risk.

Such a strategy of buying distressed homes consists of advertising for distressed real estate sellers, negotiating deep discounts, and reselling these homes to buyers with less than perfect credit using lease options that allow lease-option buyers to lease the home while they are repairing their credit to qualify for a mortgage.

We can buy single-family homes at deep discounts that are comparable to the discounts offered by buying distressed mortgages. These large discounts are possible for a number of reasons. In this real estate market, home sellers face a huge imbalance in supply and demand. Home sellers listing their homes could wait as much as a year to sell, during which time the outlook for prices is a decline. Further, with the decline in the availability of mortgage credit, few buyers can get mortgages. In our market, banks are overloaded with residential real estate loans and do not want to make any more. Further, the seller has to compete with real estate that is being dumped on the market in foreclosures proceedings and in sales of real estate owned by the mortgage lenders.

When a distressed seller enters this market, the distressed seller needs cash and he needs it fast. He finds that there are few if any buyers. To more his home fast, he needs to sell at a very low price. Thus, it is possible to buy homes at prices that are equivalent to the prices that are paid for distressed debt on similar properties.

The difference between buying the distressed debt and buying the distressed property is that the distressed property buyer has total ownership and control of the property while the distressed debt buyer is at the mercy of the property owner in a bad real estate market. The distressed homebuyer has all the equity and can improve the property easily and immediately re-sell or lease it.


In sum, in terms of return on investment, obtaining an asset that has to be foreclosed at 30% of its face value and praying that the asset is salvageable and serviceable at the end of the perfection/foreclosure cycle may not be cheap enough if the cost of bringing it back up to habitable status is 70% of the value. We believe that the more you study the matter, the more buying distressed homes offers better returns with less risk.

John Lux is a principal in the Florida Strategic Opportunity Fund, LLC.

Article Source: ArticleSpan

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