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Real estate investing

6th December 2020

Key Takeaways:

•          What is pre-foreclosure?

•          Pre-foreclosure vs foreclosure

•          How to find pre-foreclosure listings

•          How to buy pre-foreclosure homes

Foreclosure property investing is a common strategy in real estate, yet many investors have yet to uncover the benefits of pre-foreclosures. Read on to gain an understanding of the pre-foreclosure definition, how pre-foreclosures are different from foreclosures, and how to buy a house in pre-foreclosure.

What Does Pre-Foreclosure Mean?

The pre-foreclosure meaning is the stage in which a Notice of Default has been issued to the property owner, but before the property has been listed to be sold through a pre-foreclosure auction. Although buying a pre-foreclosure can be challenging, investors often find that pursuing pre-foreclosure homes is well worth the effort, as they can usually be acquired below market value.

Pre-Foreclosure Vs Foreclosure

There is a distinct difference between a pre-foreclosure listing and a property that has entered foreclosure. A property enters foreclosure when the owner has failed to make mortgage payments. The lending institution takes possession of the property as collateral. Once the property is in foreclosure, the lender will re-list the property for sale and usually at a discounted price. As mentioned in the section above, a pre-foreclosure process is usually in the stage in which the owner has already been given a default notice but has not actually been foreclosed upon yet. In line with this, pre-foreclosure properties are not necessarily up for sale until they are officially in the foreclosure stage. Investors who identify owners in the pre-foreclosure stage have the benefit of negotiating a deal before the property has been listed.

Where to Find Pre-Foreclosure Listings

• Online records: In some cases, counties provide property databases online. To check whether this service is available in your locale, you can visit your county website or search your county’s name followed with search terms such as “property data.” From there, you should be able to find any online records that are provided. Most county databases will provide the option to filter searches by property or document type, thus helping to create your pre-foreclosure list.

• Legal notices: You can also find properties that are up for pre-foreclosure auction by searching the legal notice section of the newspaper. This section will publish pre-foreclosure listings that will be going up for sale at a foreclosure auction. You can use the property data to search for the title company that recorded the NOD and then reach out to that company to obtain their list of pre-closure leads.

• Real Estate Agents: Since real estate agents have access to the MLS, they are a viable source for finding pre-foreclosure lists. They can narrow down their search in the MLS to only provide pre-foreclosure listings. Using a real estate agent means you will be getting professional help as well, and all the heavy lifting will be done for you. You will have peace of mind knowing they will handle any paperwork efficiently and correctly.

How to Buy Pre-Foreclosure Homes in 7 Steps

1. Start your search. You should be prepared to spend a significant amount of time in the research and marketing phases. First, you can search through online pre-foreclosure listing sites, including those published in the county records. In addition, some general real estate listing sites.

2. Get status updates. When identifying pre-foreclosure listings, also make sure to write down the name of the trustee or attorney, which will often be the title company. You should contact the trustee to get status updates on the property, for it is not uncommon for homeowners to resolve their financial issues not to lose their property.

3. Know your numbers. If the data is provided, note the outstanding loan balance and liens on the property. You can use available data points to get a rough estimate of the would-be foreclosure sale price. Then, subtract the amount it will cost you to acquire the property to come up with the figure at which you would break even.

4. Reach out. You may be able to reach out to them directly by a phone call, but most likely, you will need to design a direct mail marketing campaign. During this step, keep in mind that the owners are in a state of distress, so tailor your messaging in such a way that highlights the solutions you can provide while remaining tactful. Some homeowners may be in a state of denial, so you be prepared to follow up as necessary.

5. Make an offer. If the homeowner is receptive, you may venture to ask for a tour of the property to help you get better estimates on the cost of repairs or renovations. The estimated figure should be factored into your break-even number before making your offer to the homeowner and entering negotiations.

6. Compose a purchase agreement. Once you and the owner have reached a deal, it is time to put it into writing. It may be in your best interest to work with a real estate attorney or an agent who specializes in foreclosures to help you compose a purchase agreement. Be sure to include any applicable contingencies, such as one for an inspection or title search.

7. Enter escrow and close. Once both parties have signed the purchase agreement, an escrow company will serve as the neutral third party to transfer funds and ownership before closing. Once all contingencies have been lifted, and the closing date has been reached, the property should now be officially yours.

I hope this will help you in buying a Pre-Foreclosure Property.

Comment Below and Let me know, and of course feel free to contact me any questions you might have about getting started.

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