Jeff Adams: How to Navigate a Pre-Foreclosure Investment

When a homeowner is unable to pay his mortgage dues for a long period of time, the lender may choose to send him a legal notice initiating a foreclosure process to seize the property. However, before the actual foreclosure process starts, there is a grace period known the pre-foreclosure where the homeowner may choose the sell the property in order to recover the funds and avoid the foreclosure stage.

Jeff Adams believes that this can be quite a lucrative deal for many buyers. But you need to know what you are getting into. Buying a home in pre-foreclosure is not the same as a regular real estate investment, and you need to be alert and smart in your decisions.

Identify the Opportunities
When a legal action is initiated, this may be because the homeowner is completely under water financially and does not have any equity. Some homeowners may be denial about the legal action, whereas others may be more willing to finding a feasible alternative to avoid the foreclosure process. In such a case, they may be more open to allow potential buyers to conduct inspections. This helps to reduce the risk in the transaction and provide a more accurate valuation of the property.

It is important to do your research well before you make a pre-foreclosure investment. You can even purchase a title insurance which will minimize the risk post-sale.

The ideal way to identify a property in its pre-foreclosure stage is to engage with a real estate broker who has sufficient experience in the field and will be able to guide you through the process. A broker may also have access to information regarding new default notices and potential properties available under the foreclosure procedure.

Evaluate the Options
There may be a large number of foreclosures on the market at a given time. This will leave you with plenty of options to consider. So it is best to not jump on the first option you find. Thoroughly evaluate your options with a property inspection and by hiring the services of an expert who can guide you on the do’s and don’ts of pre-foreclosure investments.

Sometimes if the owner has no equity in the property, the lender may agree to a short sale. This means that the lender may accept a lesser amount than what is owed to close the case.

In such a situation, the primary mortgage holder will be the main negotiating partner, but the investor also needs to get a nod of approval from the other lien holders.

While making a pre-foreclosure investment it is important that you stay on the right side of the law. Having an expert involved, can help you navigate all the terms and conditions involved. Jeff Adams #1 Real Estate Trainer also has one other tip. While the legal processes are important, you also need to approach the investment in an ethical and compassionate manner to build trust with the existing owner and aim for a positive outcome from the deal.


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