What Are Junior Lien Foreclosures?

Unless you have been living in a cave somewhere, you have probably heard that the residential real estate market is practically in the gutter. Foreclosures are at an all time high and are expected to continue to rise in the next two years. Many so-called real estate investors are packing up and heading back home, with their tails between their legs. But not you. Not if you know how to use this buyer's market to your advantage and make more money than ever.

Junior lien foreclosures occur prior to an actual bank foreclosure. It takes about 6 months for the bank to complete the entire foreclosure process. During this time, the bank is not getting paid any money, the house is lived in but most likely not being taken care of properly, and the bank cannot sell the house. No money is coming in for the bank, but plenty is going out. Lawyers cost plenty and foreclosures have to go through the court system.

Because of the influx of foreclosures on the market, the court system is overburdened with the foreclosure process which means it can even take longer for a bank to foreclose on an errant borrower. During that time, the borrower is living rent free and doing whatever they want to the property. If you have ever been inside a house that went into foreclosure, you know that it is not a pretty sight. You might see holes punched in walls, doors missing, light fixtures ripped from their sockets. People who are getting tossed out of their homes are sometimes angry or trying to take everything that is not nailed down.

This is where a savvy investor comes in. If you proceed with a junior lien foreclosure, you can intercede in the middle of the foreclosure with the bank, purchase the property and satisfy both the bank and the owners.

In most cases, the owners of the property just want to get out and on with their lives. They cannot sell the property and may owe more than what the property is worth. They are anxious and scared. You come in and make them an offer to sell their property so that they can walk away without it costing them any money. This is known as the short sale, or junior lien foreclosure.

Because you are saving the bank not only from the legal hassle of foreclosure, but also from having to sell the property once it has been foreclosed upon, you can offer quite a bit less than the property is worth. And the bank will most likely take it! You may have to negotiate for a while, but it will be well worth it. More than likely, the bank does not need another foreclosure on their hands.

In order to facilitate such a transaction successfully, you need to learn as much as you can about junior lien foreclosures, short sales and real estate investing in general. Once you are armed with this knowledge, you will be able to not only make money in this down buyer's market, but you will not have to compete with thousands of other investors who want to get their hands on foreclosures. Your knowledge and skills that you can easily learn from one seminar or class will knock the competition out of the water and put you at the head of the real estate investment game.

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