Reasons Why Foreclosure Happens

There are many factors that can cause foreclosures. As a realtor who has bought foreclosed homes, and as someone who have talked with so many people who owns foreclosure homes and with the other experiences that I have in the real estate business, I conducted a research and I have found out the factors which caused foreclosures in almost every province in Canada. Just for example, I have found out that certain events in life such as a death in the family or divorce can cause foreclosures in even the best housing markets, and also the negative equity.

So how the death in the family and divorce can cause foreclosures? Here’s the quick explanation for that: When the head that supports all the financial needs of the family dies, that quickly results to foreclosure especially when no one in the remaining family members can pay the mortgage payments.

Divorce: The husband and wife get so busy during the divorce process that they missed to pay their mortgage payments and other financial obligations in the house. what usually happened is that one of them wants to stay and refuses to leave, and the other one refuses to pay.

What leave the owners of the home to have their properties in foreclosure are the declining prices. Declining prices leaves the owners with negative equity and negative equity means that as a homeowner you owe more money than the value of your home; You loaned for money, you have afforded the home, but then the prices for real estate declined, so your home property value declines too. Negative equity is known as the number one cause of foreclosure.

Negative equity is a really unfortunate situation that any homeowner can experience. It is referred to as being “UNDERWATER”. When a homeowner is in this situation, the options of “non-underwater” homeowners such as the option of selling the home to pay for the remaining mortgage payments and earn some profits from it and the option of refinancing the home aren’t available for them. Underwater homeowners have foreclosure only as their way out not unless they can talk it out with their lenders. If the lender agrees to buy foreclosed homes Canada, changes to the payment plans, the homeowner might be able to save the home from foreclosure.

Now, regarding the declining prices, the economic crises are what causing it. One example is what happened during early 2000. Banks and other home loaners put buyers in homes they could not otherwise afford, and then crises happened. There were millions of people who lost their jobs and the entire economy was down. These resulted for people who loaned to be unable to pay their mortgage payments so what happened next are prices dropped by 50% or more in the hardest hit areas. As prices declined, foreclosures rose.

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