Pre-Foreclosures – Profitable Means to Owning Real Estate by Jeff Adams

Pre-Foreclosure properties are pre-owned houses that are on the market due to a default in their mortgage payments.  Once the owner fails to make consecutive payments, the lender issues a notice to the owner stating a deadline to pay outstanding dues. In the meantime, the property gets categorized into possible foreclosure mode, which will be considered full term foreclosure once the owner exceeds the deadline and the property would be auctioned off to the highest bid. During this transitional phase, the owner looks out for an option to salvage his credibility by selling his property at a break-even price. Pre foreclosure property investment is the new Silver Lining of the bleak Real Estate sector.

Pre-foreclosure houses are usually priced at a lower than the original market rate of a house in the same location. The minimal pricing automatically increases the margin of profit. The pre-foreclosure property investment is a relatively untapped market which provides for great options to buyers who would like to “own” a property, without the need to break their 401K or taking a monumental loan with dizzying interest rates.


Why Pre-Foreclosure

It is a lucrative deal to acquire a great property for a lesser fraction of the price but also have the freedom to later sell the house or rent it out at a competitive or an incremental price almost immediately post buying.

When it comes to a pre-owned property, buyers are saved from doing an extensive research of the property, which is a pre-requisite before real estate investment. The assurance comes from the fact that the previous owners must have done their homework before making the property their loved home, which they had to reluctantly give up due to unavoidable financial circumstances. Also, the original Ownership agreement covers most of the terms and conditions pertaining to the property, which can be transferred into the new agreement.

The buyers who carefully invest in a prime Pre-Foreclosure property consider the option of renting it out to temporary residents, especially if such a property is located near a business zone or in a high-end residential complex.


How to buy a Pre-Foreclosure Property

A pre-foreclosure Listing can be found in the real estate listing corners of newspaper dailies. The owner would specify it as a Fire sale, in which case the buyer can contact the owner directly for sale. Otherwise if the owner has outsourced it to a real estate agent, then the agent can be contacted for the listing information. Taking all factors into consideration, the buyer can negotiate a price that is profitable to the buyer, as well as favorable to the owner, who wants to cover the default completely. Buyers who prefer to risk the competition and would like to pay a price that’s in par with the public consensus can outbid at the auction, held immediately on foreclosure. Once the sale is done, the legal team would draw an agreement stating ownership and the property would be off the foreclosure market.


Pre-Requisites to be considered before buying a pre foreclosure property

Jeff Adams suggests, even with all the lucrative gains and low-risk propositioning this investment entails, the buyer should do the due diligence, which involves:

  • The buyer should make sure all the paperwork is in place and the property sale is still in default as well in the pre-auction stage.
  • Once the buyer zeroes-in on a viable property, he should go check on the property. It’s better to do a mental evaluation of the existing condition of the property and to see if it is sale worthy. The owner could also get a neutral stand by having a word with the neighbors on any unknown factual.
  • The buyer may also want to consider any miscellaneous and overhead costs to bear in terms of repair and maintenance. He should make sure all this is accounted for while considering the final sale price. Also, if the buyer is planning to re-sell the place shortly after buying, it’s better if he estimates the time and cost factor of bringing the place to optimum shape, so that it does not dent his profit margin.
  • Before making a decision, the buyer needs to be aware of all foreclosure laws to protect his estate and avoid any legal conflict in the future.

Buying Real Estate is always a smart financial move. This is because real estate prices are always on the rise. No matter whatever the tilt of the US financial see-saw, people need a home to live. Investing a pre-foreclosure property and making it your own is a pretty good start. Substantial profit margin, furnished property, safe investment…the list of benefits of owning a Pre Foreclosure is a long one. There is no better time than the present to make that leap.