Holders of junior liens lose out at home foreclosure auctions. Holders may buy a home to protect their investment and then try to figure out how to get their investment back. Home foreclosure auctions are stressful times for private party lenders. This is another group of people the foreclosure investor can help.

The idea of private party lenders is to make a higher interest rate than they can get at the bank. Especially now with CD interest rates so low. These people did not go into this to end up with the home. They want to sell the home so they can start getting their income from their investment back.

As state above, private lenders are not in the real estate business, they are in the investment business and are highly motivated to sell you the home providing they can get the profit level they need. When negotiating with a private lender find out how much profit they need and still give yourself at least 20% of the value to work with to get a profit. Don't go more than 20% under market value of any home if you want to make a profit later on.

At any rate you will own the home, the prior owners are now renters with an option to buy. You will have the deed in your name and signed a lease with them that will give them the option to purchase the home back. If they don't pay, evicting them is much easier than home foreclosure auctions.

In your lease option agreement, if the previous owner doesn't want to use an attorney to finalize the sale put a clause in your agreement that says that you have advised him to seek legal advice but chose not to. Make your agreement as clear as you can - spell out everything in layman's terms that anyone could understand. If your going to be investing, get a good real estate attorney. You never know what might crop up to cause complications. Include his fees in your acquisition numbers.

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Prepare a package, included in the package is a purchase order and check in the amount of $5,000-$10,000 made payable to your favorite title company, a list of the terms you want such as 5% interest for 30 years and a down payment. Make this offer valid for 2-3 days only. Then overnight your package to the lender of the default mortgage. Talk to  lenders before foreclosure auctions. Draw up an agreement to purchase the home for less than the loan amount if there are no bidders at the foreclosure auctions. Then immediately close the sale, financing through the lender with, hopefully, a very low down payment. You have eliminated any existing loans, purchased at or below the original default loan amount.

With conditions the way they are now banks are highly motivated to sell off their properties. Of course you will find others that don't care, but those are the exception. If your bank has that attitude there are many other banks to choose from.

Treat the home just like any others you consider. If the numbers look good you have a good chance of the bank accepting your offer if it's close to what they are asking for it.

When you find a favorable bank talk to the loan officer and tell him what you are looking for and to contact you should a home become available. Different banks have different ways of handling this. They may either call you / you call them / be put on a mailing list.

The advantage of bank REO's is the elimination of any liens, back taxes, etc as the bank has purchased properties back at foreclosure auctions. Auctions clear of most problems. You should also receive favorable financing, especially now. They are usually willing to make you a good deal by either giving you a low down, lowering interest rate, defer some payments or cover some or all of the closing costs. 

It would be a good idea to get to know the employees at your bank and several others. Friends are more apt to help friends. Have several checking or saving accounts at several different banks. Don't just use the ATM or drive up window - go in and chat. You never know when they may be able to help you.

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A 'due on sale' clause guarantees the bank the right to demand all money owned when the property changes hands. Talk to the bank. They will probably have no problem with the transaction given the foreclosure rate today