A pre-foreclosure home is a property that is likely to face an asset sale embargo because there are outstanding mortgage payments to be done but has not been foreclosed by the lender yet. In other words, this is the moment before the foreclosure and auction of the house happens, in which the homeowner still has some option to maintain the property but wants to sell it because he or she does not want this event to have an impact in their credit history.
The homeowner is still in the house and can even avoid foreclosure if he or she can make the respective payment. This can be done in two ways, through a refinancing agreement with the lender or by selling the home to pay off debts.
For investors and new home buyers, this is a great buying opportunity as these homes are typically sold at a price below what would be their real price on the free market. This is because homeowners need the money fast, and prefer to make a sale below their actual cost and cover the debts before the home is repossessed and their credit score is affected for a long time.
A potential homebuyer can get a property in the pre-foreclosure phase. To manage this process, it is necessary to follow some key steps and understand how the pre-foreclosure process works.
Step 1: Get an Agent
If you are an individual who wants to get a home for your family or an investor looking for the best deals in the market, you should have an expert in the field to find the best option in the purchase of your home. First thing you should do is look for a real estate agent who has experience in the search and management of pre-foreclosure homes.
The agent will not only be able to give you a list of the homes of this type that interest you most, but will also be able to guide you through the entire process.
Step 2: Get Pre-Foreclosure Lists
Keep in mind that in this process, you (as the potential buyer) are not going to negotiate with the lender or the bank, you are going to negotiate directly with the homeowner. At this point, our goal will be to find these struggling homeowners who are one step away from having their home foreclosed.
Step 3: Investigate the Property
When you have located that interesting house through these lists, it is time to know some more facts about the property. Here, we recommend that you investigate the residence personally and with the company of your agent.
Step 4: Contact the Owner
Now, it’s time to find out what is the price of the home and compare it with the approximate value you estimate based on everything you already know. To do this, it is best to have an agreement with the owner, talking to him and listening to his proposals. It is possible that the owner will try to earn something more than the house real value, his position is reasonable but does not forget that this is a complicated economic situation and that he or she will attend your offer in order to avoid bankruptcy and foreclosure.
Step 5: Submit an Offer
Once we have reached a deal with the owner in regards to the price, it is time to make an offer. Keep in mind that the main lender also comes into play, all because in case of short sales made for a price lower than the market price, both the homeowner and the lender must be in the same page, corresponding each other.