What Is Pre-foreclosure?

Pre-foreclosure, the period between default and foreclosure, means the homeowner is delinquent on their mortgage loan payments and is in danger of losing their home due to foreclosure. Pre-foreclosure properties are often listed at 40 percent less than the property’s market value since the homeowner is anxious to sell the property to clear their debts. Pre-foreclosure properties are sold “as is.”

The foreclosure process can last from 90 days to 10 months or more from the time the defaulted loan has been publicly recorded. The process ends with a public auction or trustee sale. In order to retain control of the property, the homeowner must sell the property prior to the auction. This sale must be approved by the bank.

Benefits of Pre-foreclosure Purchases

Buyers, sellers and banks can all benefit from a pre-foreclosure sale. The seller can avoid the credit damage resulting from a foreclosure. The buyer can access a property below market value, and the bank can recoup their original loan.

Drawbacks of Pre-foreclosure Purchases

In order to buy a pre-foreclosure property, the bank must approve the deal, therefore, it can take longer than purchasing a property on the open market. Pre-foreclosed properties may also have liens and unpaid taxes attached, which the new owner will have to pay. A title search prior to the purchase will show any irregularities. Also, pre-foreclosed properties may need significant repairs, which can cut into an investor’s profit margin.

Potential of Pre-foreclosure Properties

An investor with reliable and inexpensive contractors can potentially renovate or upgrade a pre-foreclosure property and sell it at a profit. Pre-foreclosure sales are more beneficial for banks than foreclosures, therefore, they are motivated to close quickly. Investors always have the option of negotiating lower closing costs, down payments and mortgage rates.

Initiating the Purchase Process

Investors can locate pre-foreclosure listings through public notices of default. They can choose to contact the homeowner directly or contact the listing agent.  RealtyTrac recommends sending a postcard, expressing interest in the property. Afterwards, they may contact them directly by telephone or through an agent.

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What Is Pre-foreclosure?

Pre-foreclosure, the period between default and foreclosure, means the homeowner is delinquent on their mortgage loan payments and is in danger of losing their home due to foreclosure. Pre-foreclosure properties are often listed at 40 percent less than the property’s market value since the homeowner is anxious to sell the property to clear their debts. Pre-foreclosure properties are sold “as is.”

The foreclosure process can last from 90 days to 10 months or more from the time the defaulted loan has been publicly recorded. The process ends with a public auction or trustee sale. In order to retain control of the property, the homeowner must sell the property prior to the auction. This sale must be approved by the bank.

Benefits of Pre-foreclosure Purchases

Buyers, sellers and banks can all benefit from a pre-foreclosure sale. The seller can avoid the credit damage resulting from a foreclosure. The buyer can access a property below market value, and the bank can recoup their original loan.

Drawbacks of Pre-foreclosure Purchases

In order to buy a pre-foreclosure property, the bank must approve the deal, therefore, it can take longer than purchasing a property on the open market. Pre-foreclosed properties may also have liens and unpaid taxes attached, which the new owner will have to pay. A title search prior to the purchase will show any irregularities. Also, pre-foreclosed properties may need significant repairs, which can cut into an investor’s profit margin.

Potential of Pre-foreclosure Properties

An investor with reliable and inexpensive contractors can potentially renovate or upgrade a pre-foreclosure property and sell it at a profit. Pre-foreclosure sales are more beneficial for banks than foreclosures, therefore, they are motivated to close quickly. Investors always have the option of negotiating lower closing costs, down payments and mortgage rates.

Initiating the Purchase Process

Investors can locate pre-foreclosure listings through public notices of default. They can choose to contact the homeowner directly or contact the listing agent.  RealtyTrac recommends sending a postcard, expressing interest in the property. Afterwards, they may contact them directly by telephone or through an agent.

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