Learning Center Article

Article: What is Foreclosure?

Many of us have heard the term foreclosure in relation to other individuals and understand that it is not a pleasant term, but do not have a firm grasp on what it actually means. Before we go any further in discussing the profit potential available through foreclosures it is critical that we define the term foreclosure.

Almost 100% of the population, minus the small segment that has ready cash lying around, must finance a significant portion of their home purchases. Most people cannot afford to simply pay the actual cost of their new home up front. The actual percentage varies from one individual to the next; but it is common for prospective homeowners to finance anywhere between 80% -100% of the home purchase. The amount of that loan is paid back over a period of time through a tool known as a mortgage. We're probably all familiar with that term on a monthly basis ourselves.

The part that really interests us is what happens next. In some situations, the homeowner at some point in time will not be able to meet the monthly mortgage note. This, of course, could occur for a number of reasons. Bad financial decisions. Loss of employment. Medical conditions. Whatever the reason, after a certain number of late or missed payments the lender will have no choice but to call the loan. Continuing with this pattern of behavior would be a bad financial decision for the bank and their stakeholders.

In almost all cases, the lender will provide an opportunity for the homeowner to bring their payments up to date in an effort to avoid foreclosure. In most cases, the homeowners are not able to do this because they have become so mired down in financial problems. At this point the bank begins to take action to actually take back the house. This is known as foreclosure and it is possible because the property was listed as collateral when the loan was originated. While the word foreclosure leaves a bad taste in the mouths of some people, it is actually no more and no less than a business term. The bank agreed to lend the homeowner money for the purchase and in exchange the homeowner agreed to pay interest on the money with the stipulation that in the event they could no longer meet the notes on the loan; the property would be returned to the bank.

About the Author: Sal Vannutini is the creator of the software program Foreclosure Wizard. The program provides a unique step-by-step process that will help you quickly and easily determine which deals have profit potential and which ones are a waste of your time. Click here now: http://www.foreclosurewizard.com

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