Foreclosures, foreclosures, foreclosures – you can’t turn on the news without hearing about it. And, as you’ve always wanted to invest in real estate, you figure, “I’m ready to take the plunge; I want to buy bank foreclosures.”
If you’re ready to roll up your sleeves and put in some work, here is one way to buy a foreclosure – and perhaps help out a struggling homeowner at the same time.
What is a Pre-Foreclosure?
In case you don’t know, pre-foreclosure is the time span between when a homeowner (borrower) becomes late and when the property is officially foreclosed upon by the lender. This time period can be anywhere from a few weeks to a year or more. It all depends on the foreclosure laws of the state/county involved – and these vary widely.
Many struggling homeowners are happy to speak with investors (you), as they desperately want to sell before they are officially foreclosed on. This is especially true if they know that there is no hope of hanging onto their home. And, this means opportunity for investors because they can purchase a property directly from the owner before the bank forecloses.
Foreclosure Properties for Sale: How to Find Pre-Foreclosures to Buy (Locate Foreclosure Lists)
Finding pre-foreclosure properties for sale is easy and can be accomplished in a number of ways, ie:
Public Records of Foreclosure Listings: As home ownership and default info is part of public records, all you have to do is research public notices in your area. This can be very time consuming, but if you’re in no rush and plan to make real estate investing part of your financial portfolio, it can be worth the time invested.
Online Sources of Foreclosure Lists: There are so many sites online that offer information on pre-foreclosure properties for sale. Be careful when purchasing, as the information can be incomplete, outdated and just downright useless.
One of the most reputable sites on the web for purchasing any kind of real estate-related info is RealtyTrac.com.
Realtors a Great Source for Foreclosure Listings: If you know a realtor, you’re in luck. They are a great source for finding pre-foreclosure properties for sale for they have access to the MLS (Multiple Listing Service). This database can only be accessed by licensed realtors.
It is the primary data system that most real estate agents use to market and sell property. Three-quarters of all properties sold are located and sold via the MLS.
Bank Websites Have Foreclosure Listings: Many banks –especially the larger ones — list their properties (REOs) for sale on their website.
Property Preservation & Management Companies List Foreclosures: Just like banks, many of these will have foreclosure listings on their websites.
Steps to Take to Buy a Pre-Foreclosure
The process can be involved, but basically you would take the following steps:
(i) Locate Lis Pendens: A lis pendens is a written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Source: Wikipedia.
(ii) Find Financial Info about Property: This would include finding out about how much is owed on the property and which bank holds the note (the mortgage loan).
(iii) Determine Your Offer: You would do this by finding comps to get an idea of what the house is worth. You can hire an appraiser, or if you have a friend who is a realtor, get them to give you info on sales from the MLS.
Don’t forget to figure in your costs associated with the purchase, ie, closing costs, realtor fees (if you use one), appraiser fees, etc.
(iv) Contact Homeowner: Once you know all of this info, it’s time to contact the homeowner(s).
Now, this can be a little sticky because this is undoubtedly a very stressful time for the homeowner(s). They may or may not be receptive to your offer. Hence, it’s best to send them a letter instead of calling – at least at first.
Remember to approach them in an “I’m here to help” manner instead of an “I’m in this to make a profit” manner.
Buying Pre-Foreclosures: The Right of Redemption Law
Note: Does your state have a “Right of Redemption” law? If so, you need to be careful about buying pre-foreclosures. Basically, this law allows homeowners “reasonable opportunity to reacquire the property, provided certain guidelines are followed.”
For an example of how these laws read, see one county in Georgia’s Right of Redemption foreclosure law.
Foreclosure Laws: Don’t Buy a Foreclosure Until You Know the Laws of Your Jurisdiction
Each state and local municipality has its own set of foreclosure laws. Know them before you make any real estate investment – whether you’re buying it in pre-foreclosure, as an REO property or from the steps of a courthouse auction.
P.S.: Buy cheap foreclosures and build a real estate fortune!
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Learn more about how to find preforeclosures for sale from this founding member of RealEstateInvestor.com.
Copyright © 2009 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.