What are Pre-Foreclosures?
Pre-foreclosure represents the first stage in the foreclosure process.In this phase, the homeowner has missed at least one payment and is now considered delinquent on the loan. A pre-foreclosure can also be referred to as a notice of default (NOD) or Lis Pendens, which is a formal warning sent to the borrower on a loan regarding the delinquent payment(s). At this point, the owner’s delinquent status is made public and the property is added to the pre foreclosure lists.
Homes classified as preforeclosures are still technically owned by the borrowers in default on their mortgage payments. These homes are early in the foreclosure process and can offer a great opportunity, if you know how to deal with the situation. Because these homes do not appear as regular foreclosure listings, they can be more difficult to identify. Fortunately, this site does the work for you by accessing hundreds of thousands of public records of notice of defaults and lis pendens and adding them to our master database. Consider for a moment what would be involved to find pre foreclosures on your own.
How do you find Pre Foreclosures?
To obtain the latest distressed housing status and inventory, our site works with dozens of data record providers nationwide to gather relevant records. All homes from available pre foreclosure lists are posted on our website. But what kind of time and effort would it take for someone to research all these lis penden and notice of default filings on their own?
In short, it is possible, but an extremely time consuming to access, organize and evaluate all this data by yourself. The most direct way to gather the pre-foreclosure information is to visit the local courthouse. Since the lis pendens and notice of default require a formal filing against the current lender or homeowner. Gather the filings and write down all the critical information printed on them, including the names of the homeowner, lender and their lawyers, the legal description and street address of the distressed home, the loan details including past due payments and fines, and any pre-existing liens or claims. Then, record all this data in your own database.
It is possible to also scour local newspapers and their websites and look for sections where legal notices are printed. Pre-foreclosure default notices may be published here. But ultimately, you may be simply redirected to the local county records keeper. You can start the data collection process again by asking the records office for the specific information we discussed above.
Registering with our site allows you to avoid all these manual steps. On our website, you have access to thousands of preforeclosures instantly.
How to profit from Pre Foreclosures
Since these homes have not formally passed back to the lenders as REO bank foreclosures or government repossessed homes yet, the purchase of a pre foreclosed home will be negotiated first with the current homeowner. This can be a tricky situation in cases where the homeowner is under financial stress or has no interest in selling. If you have strong personal skills and can build a trusting, friendly but business like relationship with these homeowners, then by all means, proceed to negotiate! With the right approach, you can help these people consider your offer and avoid the rest of the foreclosure process.
In other cases, the homeowner may be very motivated to get out from under their home and financial problems by selling quickly. This situation would provide a golden opportunity for the buyer who acts fast. To be help move the process along quickly, create an earnest buyer profile for yourself on paper, and give a copy to the homeowner right away. You should list important aspects about your motivation and ability to quickly buy the house, such as a documented financial statement, funds available, mortgage pre-approval, etc. Also have a local real estate attorney help you draft a home purchase agreement contract. You can present it to the owner to show you’re ready to move ahead quickly. Time is precious in these early stages. Once you find a golden pre-foreclosure opportunity, the average time available to close a deal is 3-weeks or less. Otherwise, the homeowner may either resolve their notice of default or the lender may formally move the home into the foreclosure auctions stage of the foreclosure process.
Be sure to do a thorough review of the home’s condition with a professional appraiser and inspector. Then evaluate comparable sales and current price trends in the neighborhood. Once you take in consideration all repair costs, settlement of potential claims or liens and the market price points, make a purchase offer at a price that gives you an edge. In cases where the homeowner has equity in the home, you can offer a considerable below market offer, even less than the price of foreclosures in the neighborhood. You and the homeowner are likely to still make money on the deal. If no equity is available for the homeowner, push for a discount to market price that will give you an attractive return on your investment.
In any case, your profit will be determined by how you utilize the home after sale. Homes that don’t enter foreclosure but are in good condition can offer you the option to become a landlord and lease the home for monthly rent. The cash flow from rental properties can easily exceed the fixed costs of the mortgage, taxes and maintenance. This puts cash profits into your pocket every month. Otherwise, if you factored in sufficient funds to refurbish the home, updating it and reselling are options. Be sure you are comfortable with the current amount of time needed to sell in the neighborhood. If it takes too long to resell, you may wind up cutting your price back to the level of available foreclosures, and cut your profit as well. Thirdly, live in the home for the long term. Regardless of the state of the housing market, by living in the home for the long term, you have the ability to enjoy the privacy, freedom and comfort only your own home can provide. Then, as equity builds over time, you have locked in a long term gain for yourself.