Pre foreclosure is the last stage before a property is foreclosed. When the home owner gets behind on their payments, the lender files a public default notice to initiate the foreclosure process. The bank or lender is about to repossess the property unless the owner can make the payments that are due on the property. The owner is still in complete control of the home, and they usually have two or three months to settle the default amount of debt. If they are able to make the required payment, then the property will go back to its regular status.
When buying real estate, pre foreclosure offers a great option to save money. It offers one of the best investment options, but many people are simply unaware of this method and all of its benefits. In many cases, the owner is in a position where he is forced to sell the property. Because his choices are limited, he will usually consider any fair offer he receives. Avoiding foreclosure is beneficial to all parties, and the seller’s credit history will not be harmed. Often times the property will be available at up to 50% off its market value, thereby saving the buyer thousands of dollars.
One of the other benefits is you are able to deal directly with the home owner, rather than a third party. If the owner turns down your offer, they could stand to lose the entire property to the lender. However, by accepting your offer they can still make some money on the sale of the property, even if your offer is low.
When searching for pre foreclosure properties, you can find them listed in the same places where you find properties the lender has already taken control of. These include the internet, the local newspaper, or contacting the lender directly. It is a good idea to take a drive by the property to learn about the neighborhood and the condition of the property. You may even have the opportunity to chat casually with the owner or a next door neighbor to learn valuable information about the property.
Once you have contacted the property owner, you may have a chance to walk through the property to make sure it meets your requirements. As the owner is likely short of cash, the property may require substantial repairs. You may need to put some “sweat equity” into the property, so keep a tab of your estimated repair costs when submitting an offer.
Buying a pre foreclosure property can be a very profitable investment, and there will be less competition for these properties than one that has already been foreclosed. When looking for a new home, don’t forget to search pre foreclosed properties where your dream home may be waiting for you.
