Are you several payments behind on your mortgage and not been able to get any more relief from your lender? The next person you see at your door just might be Frank the Foreclosure Man. Do not be surprised to discover that Frank is not from your mortgage company.
Frank the Foreclosure Man is a composite I made up to describe what is generally referred to as a foreclosure specialist or foreclosure broker. It was the early 1980’s when I first met Frank, a man who made his living off foreclosed properties. Back then, interest rates were skyrocketing, homeowners were having trouble selling, and foreclosures were going up. Frank appeared on the scene, sought out desperate homeowners and attempted to get them to sell their homes to him for the amount in arrears. Frank then resold at a higher price or took the unsuspecting owner on the ride of his financial life. Frank disappeared for a while after interest rates went down and the real estate market got hot, but now he is back. It’s not because foreclosure rates are going up.
According to RealtyTrac, (www.realtytrac.com) an industry organization that maintains a nationwide database of foreclosures, foreclose rates are going down. Its market summary there are currently (March 2017) 808,143 properties in U.S. that are in some stage of foreclosure (default, auction or bank owned). In February, the number of properties that received a foreclosure filing in U.S. was 1% lower than the previous month and 16% lower than the same time last year. Home sales for January 2017 were down 26% compared with the previous month, and down 76% compared with a year ago. The median sales price of a non-distressed home was $215,000. The median sales price of a foreclosure home was $126,000, or 41% lower than non-distressed home sales.
Nationally, one in every 1,609 housing units were in some form of foreclosure. The Top Five States were as follows:
New Jersey — 1 in every 581;
Delaware — 1 in every 654;
Maryland — 1 in every 743;
Illinois — 1 in every 886; and
Nevada — 1 in every 1070
In Mississippi one every 2985 housing units were in some form of foreclosure. The following counties were listed as the Top Five:
Hinds — 1 in every 589;
Pearl River — 1 in every 2011;
Hancock — 1 in every 2224:
Rankin — 1 in every 2367; and
De Soto — 1 in every 2389.
If foreclosures are down, why is Frank back? I suspect it has something to do with television shows and other marketing selling courses on how to buy foreclosed properties and flip them. Whatever the case, it pays for homeowners in mortgage trouble to be especially aware. Let’s learn more about how Frank operates.
Frank the Foreclosure Man awakens each day and immediately checks the newspaper. He does not care about the news; he goes straight for the legal notices. There he scans the foreclosure section and makes a list of houses in certain neighborhoods. Some of these houses he will want to buy and others he will want to negotiate with the owner. His goal is to find homeowners who are behind on their payments, but have a lot of equity in their property. He is especially in search of owners who are desperate. He knows that desperate owners feel that they have only two choices – lose their home to a foreclosure sale or negotiate with Frank to keep their home.
Frank calls on the owner and says that he may be able to help in these desperate times. In Mississippi a lender can foreclose on a home in a matter of several weeks after giving public notice. In some states it takes several months. Frank points out to the owner that if the property sells for less than the mortgage balance plus expenses then the owner may have a judgment placed against for the remaining balance. And then there is that nasty matter of a credit rating that will certainly be affected. The owner, not wanting to lose his home, his credit rating and more, listens to Frank.
Frank’s offer is rather straightforward. Frank will buy the property for the back payments and then lease the house back to the owner until the owner can get financially back on his feet. Frank even promises to resell the house to the owner for only a small profit for Frank’s time and effort. Frank whips out a warranty deed and has the owner signs the property over to him.
Now it gets interesting. Depending on the circumstances, Frank might just hold onto the deed and collect payments from the owner. He will use that money, plus his own, to make up the back payments so that the foreclosure does not go forward. He might begin advertising the property for sale at market value. If he finds a buyer he might evict the owner, file the deed and then sell to the new buyer. That can result in a hefty profit. Sometimes the old owner does not make the payments to Frank, moves out and leaves a vacant house. In that case, Frank may even rent it if he can get more in rent than the mortgage payment, or he may sell it.
So, is Frank the Foreclosure Man in a legitimate business? As long as there are no misrepresentations to the owner or the lender, Frank may very well be providing a valuable service. Websites are also popping up offering programs to teach you how to be a foreclosure specialist. There is probably a cable television program on the subject by now.
Is Frank the Foreclosure Man a piranha? That’s what one state attorney general calls foreclosure specialists.
If you are a homeowner who has received a foreclosure notice, contact an attorney and discuss your legal rights. I would advise you to contact your lender, but I am assuming that because foreclosure proceedings have begun you have already done that with unsuccessful results. By all means, do not sell your house for less than market value without being fully informed.
» Phil Hardwick is a regular Mississippi Business Journal columnist and owner of Hardwick & Associates, LLC, which provides strategic planning facilitation and leadership training services. His email is phil@philhardwick. com and he ‘s on the web at www.philhardwick.com.