With the press full of more bad news about defaulting home owners and a rise in foreclosures the question most people ask me is: “Jeff, how do people get into that state in the first place?”

Being a real estate expert who has seen foreclosures close up I can tell you that a foreclosure is never the result of a single incident. It’s never, for instance, a case of a little bad luck, the loss of a job, a car accident or some ill health. These are deplorable situations to occur, to be sure, but on their own they are never enough to take a home owner who has purchased his dream property, down.

What usually happens is that home owners who end up facing the dreaded prospect of a foreclosure have consistently boxed themselves in closing their prospects and notching up debt through the consistent use of credit to finance debts. This is a case of “robbing Peter to pay Paul” and the scenario, all too familiar goes a little like this:

The home owner boxed into a financial corner, rather than thinking of how he can reduce outgoings and perhaps downsize his lifestyle until his financial condition improves he chooses to take out a second and maybe even a third mortgage and release equity stored up in the house.

Now there’s nothing wrong in doing anything like this. Equity stored up in a property could be released which means that it can, if used properly, save a house owner in trouble. The problem is that house owners forced to release the equity in their homes very rarely manage to use this facility properly. Feeling a certain sense of desperation, they leave it too late to shop around for credit, fail to look at the fine print and feel incapable of negotiating with the lender. As a result they get locked down into second mortgages which hit them with hefty interest rates after a brief honeymoon period which usually last between six months and a year.

The increased payments the home owner then has to make put him back into the same situation he was in before he took out the loan which means he then gets into a greater panic and is forced to take out another loan from an ever shrinking number of choices which leaves him in the worst possible financial bargaining state to be in and what will happen next is a story that’s pretty much foreclosed and inevitable.

The tragedy is that a little careful planning here could possibly have averted the worst as the fine print would have revealed it early enough for the home owner to either avoid getting the loan or making an adjustment in order to meet the higher cost. So the lesson is when it comes to credit the fine print is all important.

At first glance there is little to link the Bank of England with foreclosures in the United States.  After all American real estate (and the state it is in) should have little enough to do with one of the world’s oldest banks across the big pond.

And yet, the truth is that the ‘first glance’ is deceptive. Foreclosures are a fact that depends on a simple premise: credit, or rather the lack of it. The latest Bank of England report on the financial crisis we are facing gives a stern warning concerning the potential shrinking of credit, the overexposure of UK investment institutions in the US real estate sub-prime mortgage market and the very distinct possibility that we are heading for a severe credit crunch.

Until recently the Bank of England had held silent on the matter so the warning it has now issued is not to be taken lightly. Essentially the report highlights the fact that the overexposure of UK financial institutions in the US market may lead to a drop in profits as they take a hit, which will lead to a toughening up of available credit for commercial organizations as well as private clients which will lead to a shrinking of the economy in terms of a reduction in growth which may suddenly start a recession.

This is bad news indeed. In terms of real estate this is what will happen: There will be an increase in foreclosures as more and more mortgage holders find they can no longer make payments due to the fact that they have lost their jobs or can no longer access the kind of credit they need to keep afloat due to tougher lending practices. Lenders will move to recoup their costs faster, which means that rather than risking house prices dropping and their exposure in terms of properties they have foreclosed on, increasing they will move to foreclose early and sell as soon as possible.

This is indeed what is happening already in some parts of the country where lenders feel they have been overexposed and are now looking to minimize the risk. In other parts however, as well as in the United Kingdom, this has not happened which might mean that it is still possible it will not happen at all and all we will experience is a gentle correction of real estate prices across the world, rather than a bubble bursting and prices collapsing.

The Bank of England warning, at the moment, is just that, a warning. But not heeding it and preparing for the worst while hoping for the best can be foolhardy.

Selling a house can prove a daunting task unless you are familiar with the things that need to be done before letting people know your house is for sale. There is no magic formula to sell the house and you need to do careful planning and meticulously spruce up your home.

Despite best efforts, some houses do not sell and there must be certain valid reasons for this. Of course real estate agents will tell you that there is buyer for every home. The one most likely reason is your expectations are unreasonable and the house is overpriced. All prospective house buyers know the market value of a house and will simply turn away if you quote anything exorbitant. So, the right thing to do is to lower the price after studying the market conditions and knowing what prices houses in the neighborhood are fetching.

Most real estate agents, real estate investors and prospective buyers will see your listing within 30 days and the first thing they notice is the expected price. Even if the indicated price is marginally more, they will lose interest and will not pursue further. Some real agents also play tricks that delay the sale. Sometimes, they are the ones who ask you to inflate the sale price. They generally use the over-priced properties to sell their own listed properties.

Another reason for delay in selling your house may be because the house was ill-maintained. Remove all personal photographs from the walls and all personal collections from the showcases. Prospective buyers are not interested to see your possessions but imagine their own photos on the walls and their own belongings all over the house. People have a habit of collecting huge piles of junk which is an eyesore to any visitor. Get rid of all the junk or donate them if they are still useful. Make sure the kitchen and toilets are particularly neat and .clean. All prospective buyers have a tendency to open and view kitchen and bathrooms. If a buyer finds everything organized, he will believe you would have taken good care of the house all along. Carry out all minor repairs lest the buyer lest these things distract a buyer into changing his decision. Remove all unwanted furniture that blocks free passage when the buyer comes to inspect the house. Mow the lawn and keep the sidewalks clean as the first impression a buyer gets is the best impression.

The location and neighborhood of you house are of paramount importance. The buyer will obviously expect schools, shopping, hospital, and other similar facilities near the house. If your house is not in a proper locality, you can not be blamed.

All you can do is to extend some concession in price or offer seller financing or a lease option with rent credit.

Another key factor is engaging the right kind of real estate agent. The wrong type of agent will encourage you to overprice your home, fail to screen for potential buyers, not responding to interest from other agents. If your agent is apathetic, other agents may not share their prospective buyers list.

Computers and the Internet have dramatically changed the real estate marketing scenario. According to the National Association of Realtors, more than one-third of all home buyers use the Internet for deciding their purchase. Your agent will have to do your listing in color to show to clients and communicate with clients through emails.