Bad Credit Mortgages Lure Opportunity Investors

Homeowners faced with financial problems related to bad credit mortgages are finding few options in this difficult market. As a last resort, some are turning to investors who buy properties cheap, and help homeowners avoid foreclosure.

If you opted for a bad credit mortgage with an adjustable rate and can no longer make your payments, your options may be drying up. If you haven't cleaned up your credit, you won't qualify for a refinance. Selling your home-especially for the amount you owe-may be extremely difficult because, in this recessed market, buyers are few and far between. As a last ditch effort, you may be able to sell your home to an investor who specializes in bargain basement purchases. While you probably won't turn a profit-and may be lucky just to break even-you might be able to get out from under your mortgage debt and get on with your life. Starting fresh will be much easier without having a foreclosure hanging over you to further complicate your life and damage your credit.

Mortgage epidemic

Approximately $50 billion worth of adjustable-rate mortgages reset last month. If you're watching your monthly payments go up, you're not alone. The epidemic is affecting people all over the U.S., and has inspired a growing industry of investors who specialize in distressed property. This doesn't necessarily mean that homes are in disrepair, however. Many are in pristine condition, and thousands of so-called bargain basement properties carry price tags of a million dollars. But when investors can buy a $2 million dollar house for half the price, they jump at the chance to double their money. Others specialize in homes that they can acquire for under $50,000, and it's not uncommon to find homes worth $100,000 or more for sale in that range, especially if there are extenuating circumstances.

"We Buy Ugly Houses"

Many of these bottom-fishers use the slogan "we buy ugly houses." While the physical appearance of the house may not be ugly, the situation of the homeowner frequently is. Many face one or more overwhelming or catastrophic events, including loss of jobs, divorce, medical expenses, or death of a spouse. Other problems may include trouble with tenants in rental properties, inability to keep up with needed repairs or city building codes, and-most common of all-expensive monthly payments that can't be met.

As adjustable-rate mortgages, interest-only loans, and other mortgages that looked irresistible a few years ago suddenly shift gears and follow a skyrocketing upward trend, more and more Americans are falling behind on their payments. Within a matter of weeks, foreclosure may be imminent for many of these people, and savvy investors monitor legal announcements to find properties that are being foreclosed. Then, they pay the homeowner a visit with an offer to buy.

Selling to these "opportunity investors" may be a legitimate solution to a worsening problem. If you decide that this type of deal is worth it to you, consult a qualified real estate attorney for taking any action.