Pre-Foreclosures
A pre-foreclosure is the period of time between when the lender files a foreclosure lawsuit in the public records and the date the property is to be sold at a public auction. Buying pre-foreclosed property is becoming more and more popular. In pre-foreclosure, you can plan to buy out the delinquent homeowner’s equity and possibly acquire his or her loan at a very low price. This is convenient because you do not have to deal with the government or real estate brokers’ interference. Therefore, foreclosure investors agree that by dealing directly with the motivated seller, the potential for profit greatly exists.
But how do you find these pre-foreclosed homes? There are different approaches to this. For instance, you can locate the person in your county that handles the mortgage records or deed of trust foreclosure actions. This person may be called clerk, registrar, recorder or prothonotary. A county clerk, for example, is the first person to announce a notice of default in public record. You can also research your local newspaper’s “Legal Notices” section.
Making sound real estate investments is never as easy as some do-it-yourself, get-rich-quick gurus would lead us to believe. These people derive their income by selling information. If this information was as foolproof and “easy to do” as they claim, the gurus would be far better off using their so-called expertise for their own benefit.
Unquestionably, sound real estate investing is still one of the most profitable ventures out there. Naturally, real estate investment takes many forms and one method of investing is in pre-foreclosures. By this, we mean finding distressed properties – those that are delinquent in mortgage loan or tax obligations but have not as yet undergone foreclosure procedures.
As is the case with any real estate investment, an individual looking for pre-foreclosures must have a sound education in the process of negotiating and in locally applicable legalities as well as the financial ability to conclude a purchase.
Assuming the above is a given, how does a potential investor locate a pre-foreclosure property? Online services are one possibility as there are a number of services that, for a fee, will disclose their database of foreclosures, pre-foreclosures, bankruptcies, etc. Newspapers publish realty defaults, real estate attorneys specializing in defaults, and foreclosures. Perhaps you are acquainted with a local real estate agent who could help you with this information.
Pre-Foreclosures information
Once you locate a property that seems to have potential, you must act quickly. The real estate may be very close to foreclosure and/or competitors who are interested in this same property may beat you to it!
This is why specific knowledge is so important. Contacting homeowners in distress takes tact and skill. The sensitivity of the homeowner to their difficult situation must be considered. You should not appear to them as a money-hungry vulture who is anxious to capitalize on their misfortune.
Initial contact by mail is preferable. It is best to inform the owners of your interest in purchasing their property and sparing them the difficulties of foreclosure, including the negative impact on their credit rating. When a homeowner has sown as interest in your offer and agrees to a meeting, you should initiate a thorough investigation – in order to make an offer that will be profitable for you and acceptable to the seller. Remember, you are negotiating from a position of strength but be aware that the property owners may also be negotiating with a competitor.
Equity is a prime factor in determining how profitable the purchase will be. This will be counterbalanced by the amount of debt the property has accrued and of course the property’s physical condition. Location is another factor – one that can be balanced against equity. For instance, in many cases, homeowners in a difficult financial situation have depleted much of their home equity in cash out refinancing or home equity loans.
However, the natural appreciation of the home’s value if the area is a desirable one may still make a foreclosure purchase worthwhile. Finding the fair market value of a property takes some expertise and unless you are a real estate agent, will require professional help. An attorney or real estate agent can access tax records, date of purchase and purchase amount. The agent can investigate recent home purchases and selling prices of property in the area to help arrive at fair market value.
Of equal importance is uncovering all monies owed. First mortgage, any junior mortgage or mortgages, mechanics liens, etc. in order to ascertain the exact amount of accrued debt.
Next, a professional home inspection is required. Any defects found must be added to the accrued debt to arrive at a final cost. The property should be inspected for structural defects, condition of the roof, wiring, plumbing, etc.
Although the real estate market is booming in most areas with the buying and selling of new and existing homes at an all-time high, economic conditions have been unfavorable to a great many people because of company downsizing, outsourcing and bankruptcies balancing the upside of the economy.
As a result, foreclosures and pre-foreclosures are out there in considerable numbers and the educated pre-foreclosure buyer may be in a better position than ever before to reap high profits.
|
