In case you are seriously considering to purchase a pre-foreclosure property, you should first know everything that you need to know about the foreclosure process. The information below will enlighten you about how the entire process works and how to get all the details that you need. Use this information when determining, whether or not it's the perfect time for you to make an offer on a pre-foreclosure property. Check out these 7 vital aspects of finding and buying foreclosed properties.
1Finding Pre-Foreclosure Properties
Check out properties that are in the initial stage of foreclosure. During this time, the homeowner will likely be very active at selling his property before it is sold at an auction. When you do buy a house at this state, you will still have the opportunity to inspect the exterior as well as the interior of the house, unlike a house that's being auctioned off. Thus, you'll get a pretty good idea about what you are getting. As for an auctioned property, you really wouldn't have any clue about the condition of the house, not unless you win the bid.
2Understanding Default Notices
In general, a property owner receives a letter informing him that his property is in pre-foreclosure once he defaults on his loan, and the property's status will remain the same until the day of the auction. A default notice will be delivered to the property owner, and this will also contain details about the possible auction. Auctions usually occur three months after the notice is delivered.
Perhaps, you may think that the best way to obtain a cheap property is by waiting for it to be auctioned off. But, you must be aware that if the foreclosure is judicial, the entire process will take a long time to complete, which means that you too will need to wait for quite some time. You will be in a more advantageous position if you do decide to purchase a property before it goes on a public auction. At this time, you can even negotiate with the property owner, and the owner may even be willing to accept the first offer that you make.
3Many Don't Want To Handle Foreclosure
As much as possible, homeowners prefer to avoid foreclosures because it can be very bad for their credit rating, plus there is a stigma attached to foreclosed properties. Nevertheless, a person can still obtain future financing even if he has a foreclosure on his credit history. However, he will have fewer choices and be offered a higher interest rate.
As mentioned, once a property is being auctioned off, you, as the buyer, really won't have the chance to assess and check the current condition of the property, particularly the interior. Also, homeowners whose properties are currently being auctioned off won't be very willing to give you a grand tour of their houses, right? All in all, you must learn more about pre-foreclosures if you are interested in this. Do your homework properly and pay attention to every detail.
4Where To Find Pre-Foreclosure Properties
The best way to locate pre-foreclosure properties is to get in touch with the owners who are behind the mortgage payments. Once you find them, write a letter to the owners. Avoid calling them without any warning or calling them without a definite plan in mind; your efforts will be ineffective, more or less. After people receive their notice for pre-foreclosure, they will not be in the mood to answer phone calls, and they won't be eager to answer the door because they want to avoid collectors. It's also but natural for them to be wary of anyone who decides to drop by out of the blue, and they certainly won't give you their financial records just because you ask for these.
5Do Your Research
Once you find a property that you're interested in, check its court records or loan records so that you'll get some information about the liens or the terms of payment, and you can plan on whether or not you can afford to pay off the debt connected to the property. If possible, have the place thoroughly inspected too. Once you have obtained all of the pertinent financial details about the liens and outstanding loans of the property, and after the thorough inspection that aids in identifying what repairs it needs, it is now time for you to consider how much you are willing to pay for that property.
Don't forget to consider the market value as well, and then set up a meeting with the owner to discuss pricing options. If possible, talk to the foreclosing lender and the lien holders and try to agree with them. Then make an offer to purchase the property. After that, schedule the closing. This pertains to only one type of pre-foreclosure property.
6Check Online For Pre-Foreclosures
You can use the same procedure when using the internet to search for pre-foreclosure properties, and you can even readily obtain documents and details about properties that are facing imminent foreclosure. Use the following keywords: default notice, auction, foreclosure notices, tax liens, and other terms that indicate that a property is in financial trouble, which could probably lead to foreclosure. Be aware that tax liens and bankruptcies don't often lead to foreclosure; so, when you use these keywords during your search, also don't forget to consider those who have filed for possible foreclosure. Focus your search in the counties or areas where you want to buy a property; chances are that you will find a document list and other codes that will help you in finding the property that you want.
7Pay Attention To Newspaper Ads
Newspapers may also have pre-foreclosure property ads, so don't forget to check those. There's a good chance that you'll find great leads, but it will be a while before these properties are advertised. You can do a weekly online search for pre-foreclosures instead, which will give you an advantage over others who are also on the lookout for such properties. This way, you may find something weeks before it is even advertised. This means that you'll have more time to get in touch with the homeowners.
Keep in mind that initial contact should be by mail. During this time, the homeowners are feeling very tired of all the pesky creditors and collectors who are chasing after them. Instead of suddenly appearing at their front door, write them a respectful letter that details your proposal.
Identify a few drawbacks of having the house be auctioned off, and let them know that you are very much interested in discussing other options that will be more beneficial to both parties. Perhaps, you could also mention that what you are suggesting may be the better choice, especially if it's already too late for them to save their property from going to auction. If they are willing, schedule a meeting so that you can thoroughly discuss this with the homeowners.
Armed with the information provided above, you are now ready to go and search for pre-foreclosure properties. Just remember that many Americans today are facing foreclosure, so don't agree to a deal immediately, but compare and find the best deal for you. Also, when you purchase a property before it is foreclosed, you are doing something good for the homeowners. Therefore, when you buy a pre-foreclosure property, you and the seller are both benefiting. Best of luck!