How to Invest Smartly in Pre-Foreclosures According to Jeff Adams

For novice investors, the pre-foreclosure market is far better than investing in foreclosures. This is because the pre-foreclosure process is simple and lasts for just for six months. During pre-foreclosure, the borrower is still the property owner and he does have the right to sell his property.

Industry expert Jeff Adams points out that if you play smart, you can easily buy a home well below market rate and bypass the foreclosure process completely. However, it does mean you have to understand the pre-foreclosure market and use it to your benefit.

Understanding the Pre-Foreclosure Process

  • Finding Properties
    Pre-foreclosure notices are usually issued by the bank directly to the homeowner. The bank may also advertise the pre-foreclosure status on the bank’s website and to the local collection agency. However, you should know that calling up banks will not work as they don’t have the time to talk about individual properties. Try as many sources as possible to find pre-foreclosure properties for sale and list them out.


  • Confirming the Pre-Foreclosure Status of Properties
    The pre-foreclosure process is just three months long and sometimes the property owner does make up the payments. In this case, property is reinstated to the owner. Before you contact the property owner, confirm the property status by contacting the bank, the trustee or the attorney managing the foreclosure process.


  • Contacting the Owner in Default
    Contacting the owner is the next step but you should make sure you are ready to buy. Once the owner has listed the property for sale, you or your estate agent should approach the property owner and negotiate the sale. It’s a good idea to start with a letter or an email asking for an appointment. Remember, most borrowers are already in stress due the pre-foreclosure process and they might not reply back. However, as the auction date looms, the borrower will be motivated to sell and you have a better chance of getting the property. If the owner refuses to contact you, you can still buy the property during the auction.


  • Negotiate the Rate
    As you are buying the property, there are several things you should be careful of. For example, does the property have more than one lien? Does it require repairs? Can you assume the property loan? Make sure you verify all these features before you go ahead with the negotiation.


  • Close the Deal
    Once the owner and you are in settlement, you can frame the purchase agreement and go ahead with the process. Make sure everything you agreed about during negotiation is listed in the agreement and use an attorney to ensure you are protected.


Industry expert Jeff Adams, the #1 real estate trainer, states that first time home buyers should pursue pre foreclosures along with short sales, regular sales, and foreclosures as they retail at the same value. The only difference is that pre-foreclosures can be pushed through faster. If you are smart and careful, you should be able to snap up several affordable properties while still in the pre-foreclosure stage and save yourself time, money and energy.


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