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Mortgage Owned Properties (REO)
Pre-foreclosure
When the property is in default and debt is not paid to lender, it will be going on foreclosure auction sale. Depending on which type of foreclosure the property falls in to, duration of process between it becomes in default and goes to auction, can differ from 3month to 1year. Property before it goes to foreclosure auction is called pre-foreclosure property. At this point, the property owner hasn't paid monthly mortgage payments and the owner is given notice that the house will be foreclosed by financial lender. If they don't want house to go into foreclosure, they will pay up the debt. But if they are facing financial difficulty, they won't be able to take such action. Sometimes, people neglect, deny or not care for their property being foreclosed. Investor can negotiate with the owner to sell the property so that owner can get some cash instead of property just being foreclosed and get nothing. The investor profits by purchasing a house in discount.
The banks and other organization such as real estate companies, lawyers have listing of houses that are pre-foreclosures. Financial institution also makes public notice of loans in default on the newspaper, it is called Lis Pendens. This information can also be found in local county clerk's office. If you find the pre-foreclosure property, you can make an offer directly to the owner before it goes to foreclosure. You may encounter owners that have negative responses to your inquiry.The owner is, however, more likely to consider the offer if you are persistent and give them a solution to their problems. They'd rather get more money by selling it to you than simply being foreclosed and not get anything.
As an investor, you should always calculate possible profit before taking the deal. The bigger gap between the default amount and market value of the property, the more profit you will gain. Property with a lot of equity is far better than little equity in the house. Also, it is important to inspect the property to see if there is any unknown damages. Title search is also advised for any unpaid lien to any other financial institution, unpaid taxes, condo fees etc. If owner accepts your offer, they can transfer the title to you and you can directly negotiate and make arrangement with the financial lender. If you negotiated a good deal on a pre-foreclosure property, you may have substantial discount compared to retail market value.
Investor may just sell the information after finding a good deal of pre-foreclosures. Investor can sign the contract to purchase and find another buyer to assign the contract. If property is distressed or damaged, investor may rehab the property and resell it to owner occupant. (Learn more)
Want To Learn More About Foreclosure Investing?
Get Foreclosure Properties from Foreclosure ListingsRead Books on Foreclosure
Learn from Foreclosure Coach & Mentor.
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