Buying pre-foreclosure property can be a real bargain; but, the process is complicated. The pre-foreclosure stage is in between the Notice of Default and the actual sale of the property. You should know that during this period, the house is not actually on sale because the owner may be able to pay off his loan or he may challenge the foreclosure to prevent losing his property.
If you are interested in pre-foreclosure homes, here are 5 tips you should keep in mind.
1. Finding Pre-Foreclosure Homes
Pre-foreclosure homes are not for sale and owners may not be interested in sales. However, they are listed on real estate sale sites, county offices, newspapers, etc., as they are in the foreclosure process. Once you have a list of properties, make sure you check the property thoroughly before you start negotiations.
2. Status Update
After foreclosure is declared, the owner has 2-3 months to pay off his loans. This is called the reinstatement period. Before you contact the owner, make sure the property is in pre-foreclosure. The best way to ensure that the property is being sold is to contact the attorney or trustee dealing with the foreclosure.
3. Check Market Value and Contact The Owner
You can check the market value of the home by researching the property online and through real estate agents. When you have ascertained the property value, you can go ahead and contact the homeowner to make an offer. You can also ask a real estate agent to talk to the owner for a quick sale.
Please note that direct contact and discussion with the owner will be better than hiring an agent. Once the agent can convince the owner to sell, other buyers may step into the picture and this automatically increases the property price.
4. Valuation and Negotiating
You will need to check public records to find out exactly how much of the mortgage is pending and to verify any other liens on the home. After estimating this, you will also have to subtract the buyer costs you will have to pay and then come to a purchase price. This has to be negotiated with the owner. Many factors will come in to play at the time of negotiation and it usually does take time to reach an agreement.
However, once a purchase price is reached, make sure you put it in writing immediately. One way to sway the homeowner is by offering to help him. Another option is to offer the homeowner an extra two months of housing costs until they find a new home.
5. Closing the Deal
A very important point to remember is that in the pre-foreclosure stage, the homeowner can still sell his home to you without the lender or court. However, after this stage, you will have to contact the lender and the homeowner to purchase the house at a much higher rate.
Because of the complexities involved, it’s a far better idea to complete a pre-foreclosure sale after you’ve done all the necessary research.
