Buying a home in pre-foreclosure can offer a great bargain but this stage of the foreclosure process can last several months therefore, you need to have allot of patience. The pre-foreclosure stage is the time from when a Notice of Default or Lis Pendens has been issued until the time the lender puts the property up for auction. It is important to remember that during the pre-foreclosure stage the homeowner has the opportunity to bring their mortgage current and stop the foreclosure process.
Once you have located a property you are interested in you should go and check out the property and the neighborhood. This will allow you to get an idea of the condition of the property and the type of neighborhood the property is located in.
Next, make sure the property is still in default. It is possible that the homeowner has already resolved the situation. A good idea is to contact the person who has initiated the foreclosure proceedings on a property. This is usually the trustee.
If the home is still in default there are a few ways to go about contacting the homeowner. You can call the homeowner if they are listed, you can drive out to the property and try and talk to them about purchasing their property or you could write them a letter expressing your interest in their property.
If you call the homeowner and you get someone on the phone it is important to first fine out if they have any interest in selling you the property. If they do, it is even more important to ask a lot of questions regarding the property. Try and find out how much equity is in the property, if there are any tax liens on the property and if there is any additional debt besides the mortgage. Ask the homeowner about any second trusts or judgment liens. You need to confirm all the outstanding debt with the lands record office to make sure you have all the correct information. Once you have finished with all your questions if the total debt is less than 65% of the fair market value, then make an appointment to see the homeowner and make an offer.
If you decide to drive out to the property and talk to the homeowner, you should find out if the homeowner has any interest in selling the property. If you are received in a positive manner ask to see the property to check for what repairs would need to be done before you make anoffer. After inspecting the home, you should ask the same questions you would over the phone regarding any outstanding debt.
If you are unsuccessful by phone or in person you should try sending a letter to the homeowner. To make your letter stand out use a colored envelope and send your letter first class and hand write the homeowners name. In your letter, clearly explain the benefits of selling their property before the foreclosure auction. Not many homeowners will respond to your letters but the ones who are very eager to sell will.
Some pre-foreclosure properties may be vacant and you will have to track down the homeowner if you are interested in the property. It is a good idea to ask the neighbors about the property owner. More often than not, the neighbors will be helpful in providing any information they may have regarding the property owners. If they are hesitant about helping you out, let them know you are interested in buying the property and fixing it up.
Buying a home in pre-foreclosure takes time and patience but can yield a great deal for you.