Pre foreclosure has a definite meaning in the real estate industry, although many are confused about what constitutes a preforeclosure. First, let’s make it clear that it’s not the same as foreclosure. Second, it’s a very different situation you’re looking at, whether you’re going through it, or you’re buying a home in pre-foreclosure.
In varies by state, but Pre-foreclosures are properties that are in the final stage before they are auctioned off or taken back by the bank or lender. This means that the owner is still in charge of the property, but if they don’t cure the situation, the bank or financier could repossess their home.
There are many benefits in buying pre foreclosures. The reason that most people miss out on these homes is because they do not know what they are, or how to find them, often assuming an equivalence with foreclosures. In reality, the latter are the evolution of the first situation with a defined event as the pivotal moment in which one transitions into the other, usually an auction or sheriff’s sale.
The lower price of preforeclosures is the main benefit of purchasing such properties. The owner has to sell the house before the bank or lender takes it and is more motivated to listen to any offers that they receive. It is quite possible to find pre foreclosures that are up to 50% off of the market value, such is the need for the homeowner to sell to avoid the hard consequences of a preforeclosure turning into a foreclosure.
Aside from likely paying less for a home in pre foreclosure, another advantage is the ability to have direct contact with the owner without the buffer of an agent, which also charges fees that are extracted from the equity of the deal, if any. This is a big pro because the buyer is in a better position during a pre foreclosure deal to understand what can work for buyer and seller. That is vastly more difficult with any intermediary and such presence could make a deal impossible, with great disadvantage to both sides. If the home owner turns down your offer and fails to find another buyer, they will end up losing everything. If they manage to sell the home they can at least end up making back some money and avoid heavier consequences. Many home owners in this situation don’t even hire a broker or agent, as it would hit the equity that can still be pulled out of the home and it avoids getting tied up in a lengthy contract with an agent who may always fail in finding a suitable buyer, with no hard consequences for the brokerage.
Finding pre foreclosures can be done in the same way as locating homes that that bank already owns. You can find them in the courts, newspapers, online, or by calling the lender directly on the phone. It is really up to you, and you can base it on what seems to be most effective. Typically, there’s a step in which the lender makes the default official and therefore public knowledge, and that’s when lists of names and properties can be easily found and gathered to act upon.
Compared to foreclosed properties, you would normally face less competition with preforeclosures. It is obviously becomes easier to get the deal that you need and/or want at a price and terms that is more affordable and convenient for buyers and sellers respectively with this type of properties.
If you are looking for a new home, don’t forget to check out these properties as a marketing channel to find candidates. Buying pre foreclosures can be very profitable.
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