Pre Foreclosure

In these turbulent times there are more and more people unable to make their financial obligations to their mortgage companies. This can be in your favor as you can pick up a great home that is in pre foreclosure. Why now instead of foreclosure? The owners don’t want a heavy bill over their head, bankruptcy or poor credit debt so selling in this stage is to their advantage.

The lender will allow the mortgager to avoid foreclosing on their home by selling the property. This is the pre foreclosure period.

Purchasing a Pre Foreclosure Home

Contact the owner of the home. Begin by mailing a letter that states you are a private investor and that you may be able to help them by stopping their foreclosure, saving their credit and maybe even being able to provide money for paying off bills or for them to relocate.

After you’ve sent several pre foreclosure letters you may follow them up with a phone call. Never be forceful, always courteous and polite. Let them understand that they are in pre foreclosure and that to avoid all this overwhelming debt now would be the best time to sell. On your call make plans to meet at the property in question.

Homeowners in pre-foreclosure are very upset. Keep this in mind to avoid a confrontation.

Property Inspection & Loan Papers

During this pre-foreclosure phase walk the property taking notes of any repairs that will be needed. Homeowners in pre foreclosure have a tendency to not care anymore after the foreclosure proceedings begin.

The Offer

If you decide that you want to purchase this pre foreclosure property in pre foreclosure then you will need several things: the loan, ownership, and debt or lien information. Determine the pre foreclosure equity. You may now negotiate with the lender. Swing low at first, offering 20% of the lien amount. Include the closing costs in your offer if you intend to flip the pre foreclosure home.

Settling

You and the owner will both have to sign an Equity Purchase or Real Estate Purchase and Sale Agreement. Everyone on the mortgage must sign. Be sure to contact your attorney prior to signing anything though to make sure it’s on the up and up.

Once you have the contract signed and in hand it’s to enter the closing phase. Contact your lawyer and have him prepare a release of lien if you’ve reached an agreement with the holder of the lien. You will have to get your final assessments and appraisals, termite and roof inspections before closing. Do a title search on the pre foreclosure property to assure no other liens.

Assuming everything has gone your way then you’ve purchased a house in pre foreclosure at well below the market value.