Pre-foreclosures are a great way of purchasing great homes at low prices in a competitive real estate market – without having to jump through too many hoops. While most home buyers traditionally go through real estate agents or other lenders in order to purchase property, it should be noted that it is increasingly tough to locate great deals this way given the fact that the lender and real estate agent all stand to gain from the sale of the home as well.
In the same vein, going after “foreclosed” properties is as equally tough (or competitive) given the fact that you are now in direct competition with other investors and home buyers in an auction environment. However, when it comes to purchasing pre-foreclosures, none of these challenges are present as you know can deal directly with the homeowner to negotiate a fair selling price that benefits both you and the seller.
How Does the Pre-Foreclosure Process Work?
Pre-foreclosure properties are the result of a homeowner defaulting on their mortgage payments. During this time, the homeowner is alerted that they are at risk of having their property repossessed and eventually sold at auction by the lending institution.
Unless the homeowner can make the late payments to bring their loan up to “current” status, the ultimate sale of their home is the way in which the lender will collect the debt owed. However, to prevent this from occurring, homeowners look for a way out by selling their home once they’ve went into “default” status.
Unfortunately, having a “foreclosure” on your report can indeed ruin your credit and prevent you from easily obtaining a loan for another home in the future. However, during the “pre-foreclosure” stage, homeowners can avoid ruining their credit any further by simply selling their property to avoid this from occurring.
The Benefits of Pre-Foreclosure Buying & Investing
Buying a pre-foreclosure home is lucrative and attractive for investors and homebuyers because these types of homes can be purchased far below their market value given that the homeowners is willing to part with the home if they can raise enough money to cover the debt owed and other expenses related to moving. Given that the debt owed by the homeowner is far less than the value of the home, investors and homebuyers with the capital choose to work closely with the homebuyer to help them save their home, and in turn, they receive a home at a huge discount.