Submitted by Naomi M on Thu, 10/04/2007 - 02:55.
Pre-Foreclosures and Foreclosure Real Estate Investing
One of the best ways to make money in real estate investing is to buy property at a discount during a period of time called pre-foreclosure - a window of opportunity.
What is pre-foreclosure?
When a homeowner defaults on their home mortgage loan (or any other type of real property), the lender begins a process known as foreclosure to sell the property at public auction or trustee's sale in order to take ownership of the property to resell in an effort to recoup the amount left in debt on the loan. Usually, a foreclosed home will be sold at auction on the steps of a court house or title property office.
The time between the default notice and the sale date is the pre-foreclosure period. The homeowner still controls the property and can bring the loan current or sell the property to settle the debt.
Why would a homeowner sell their property during this pre-foreclosure period?
Having a property foreclosure on your credit is a really big black mark. It will prevent the homeowner from obtaining another mortgage for a period of time or the type of home loan they will qualify for will require a higher down payment and more expensive loan terms. Because of this, many homeowners will seek to sell their property before the foreclosure auction date. This will allow them to save their credit history.
Also the home owner can protect their equity. When a home is foreclosed all of the equity is lost. By working with an investor it may be possible to recover some of the equity; put cash in their pocket and prevent the foreclosure.
For the real estate investor, buying a pre-foreclosure can be a money-making opportunity, because the homeowner only needs to sell the home for the amount owed in debt, and not its full value. By contacting the owner of pre-foreclosure property and making an offer, you can often end up buying pre-foreclosure homes for as much as 50% off their actual market value!
There are a variety of pre-foreclosure properties available including homes insured by the FHA and VA and bank foreclosures. Not only are single family homes available but so are multi-tenant units (apartments) and commercial property.
Investors can do their due dilegence: Evaluate, Inspect and Negotiate
A number of benefits to an investor of pre-foreclosures make this niche of investing a very appealing alternative to buying foreclosed property. The main benefits are the investor's ability to evaluate, inspect and negotiate. Regardless of whether the investor decides to hold the property to live in himself, turn it into a rental property or repair and resell it (also known as “flippingâ€), the property is a serious investment and is best purchased after consideration of the home’s condition and interaction with the homeowner.
Evaluate: By buying a foreclosure before auction, a pre-forclosure investor can evaluate the property's potential more thoroughly. The first step involves finding pre-foreclosure listings. This can be done by monitoring the Lis Pendens notices of the homes that have loans in default. You can research this list yourself at the county courthouse or use a listing service.
NOTE: Highly successful investors have developed various strategies for finding pre-foreclosure listings or distressed home owners before the competition, which is crucial. Believe me, it does not involve going down to the court house to tediously research the public records. These methods can involve:
1. Finding a foreclosure listing service that gets new listings to you in the shortest time period and with the most "must have" information (these two components vary with different services).
2. Using methods that get home owners to call YOU early in the pre-foreclosure process ready to make a deal. This is an ideal method because you are in a stronger position to negotiate with home owner.
The experts in the Recommended Pre-Foreclosure Courses discuss these strategies in greater detail.
Once you have a distressed owner willing to talk with you, you need to determine the potential value of the pre-foreclosure home. This begins by estimating the property’s market value and subtracting the amount listed in the legal notices. A high gross equity or gross profit potential in the home makes it appealing regardless of whether it will be inhabited or flipped. Once an investor finds a distressed home with promising potential, he or she can then begin the process of inspection.
Inspect : Next you should should set up a time to meet the home owner at the property. A home inspection checklist helps the investor make a thorough assessment of the property and aids him in establishing an accurate estimated cost of repair.
In addition to the potential equity in the house, a home investor also needs to understand the condition of the property as well as the level of cooperation with the homeowner. If the investor has interest in purchasing the foreclosed property, he should set up another appointment to present his offer.
Negotiate: In order to prepare an offer, the buyer must not only determine the net equity of the foreclosure home taking into account all potential repair, closing, and lien costs, but can also attempt to negotiate with the lien holder if the remaining balance is high leaving a small equity position. Only after all of these possible figures are calculated can a home investor determine if the purchase would truly be profitable.
If the homeowner agrees to the investor’s offer, then they both sign an Equity Purchase or Real Estate Purchase and Sale Agreement. The investor should examine this document carefully to ensure no confusion about the terms and conditions of his purchase. There are specific clauses that should be incorporated into the contract in favor of the investor to protect your interests and prevent you from getting stuck with a poor investment.
Strategies for success
Whether you are a new to real estate investing or have some experience, to be successful in pre-foreclosure property investing, it's always advisable to work with a mentor. You may not have anyone in your immediate area willing to teach you how to be successful and that's where using a "virtual mentor" comes into play.
The Recommended Pre-Foreclosure Courses on this page are written by investors who "walk the walk" and have developed highly successful investing systems. You can shorten your learning curve and avoid many costly mistakes by using a "virtual mentor." Review each recommendation, make a choice and get started in this very lucrative niche of real estate investing in pre-foreclosures.
What is pre-foreclosure?
When a homeowner defaults on their home mortgage loan (or any other type of real property), the lender begins a process known as foreclosure to sell the property at public auction or trustee's sale in order to take ownership of the property to resell in an effort to recoup the amount left in debt on the loan. Usually, a foreclosed home will be sold at auction on the steps of a court house or title property office.
The time between the default notice and the sale date is the pre-foreclosure period. The homeowner still controls the property and can bring the loan current or sell the property to settle the debt.
Why would a homeowner sell their property during this pre-foreclosure period?
Having a property foreclosure on your credit is a really big black mark. It will prevent the homeowner from obtaining another mortgage for a period of time or the type of home loan they will qualify for will require a higher down payment and more expensive loan terms. Because of this, many homeowners will seek to sell their property before the foreclosure auction date. This will allow them to save their credit history.
Also the home owner can protect their equity. When a home is foreclosed all of the equity is lost. By working with an investor it may be possible to recover some of the equity; put cash in their pocket and prevent the foreclosure.
For the real estate investor, buying a pre-foreclosure can be a money-making opportunity, because the homeowner only needs to sell the home for the amount owed in debt, and not its full value. By contacting the owner of pre-foreclosure property and making an offer, you can often end up buying pre-foreclosure homes for as much as 50% off their actual market value!
There are a variety of pre-foreclosure properties available including homes insured by the FHA and VA and bank foreclosures. Not only are single family homes available but so are multi-tenant units (apartments) and commercial property.
Investors can do their due dilegence: Evaluate, Inspect and Negotiate
A number of benefits to an investor of pre-foreclosures make this niche of investing a very appealing alternative to buying foreclosed property. The main benefits are the investor's ability to evaluate, inspect and negotiate. Regardless of whether the investor decides to hold the property to live in himself, turn it into a rental property or repair and resell it (also known as “flippingâ€), the property is a serious investment and is best purchased after consideration of the home’s condition and interaction with the homeowner.
Evaluate: By buying a foreclosure before auction, a pre-forclosure investor can evaluate the property's potential more thoroughly. The first step involves finding pre-foreclosure listings. This can be done by monitoring the Lis Pendens notices of the homes that have loans in default. You can research this list yourself at the county courthouse or use a listing service.
NOTE: Highly successful investors have developed various strategies for finding pre-foreclosure listings or distressed home owners before the competition, which is crucial. Believe me, it does not involve going down to the court house to tediously research the public records. These methods can involve:
1. Finding a foreclosure listing service that gets new listings to you in the shortest time period and with the most "must have" information (these two components vary with different services).
2. Using methods that get home owners to call YOU early in the pre-foreclosure process ready to make a deal. This is an ideal method because you are in a stronger position to negotiate with home owner.
The experts in the Recommended Pre-Foreclosure Courses discuss these strategies in greater detail.
Once you have a distressed owner willing to talk with you, you need to determine the potential value of the pre-foreclosure home. This begins by estimating the property’s market value and subtracting the amount listed in the legal notices. A high gross equity or gross profit potential in the home makes it appealing regardless of whether it will be inhabited or flipped. Once an investor finds a distressed home with promising potential, he or she can then begin the process of inspection.
Inspect : Next you should should set up a time to meet the home owner at the property. A home inspection checklist helps the investor make a thorough assessment of the property and aids him in establishing an accurate estimated cost of repair.
In addition to the potential equity in the house, a home investor also needs to understand the condition of the property as well as the level of cooperation with the homeowner. If the investor has interest in purchasing the foreclosed property, he should set up another appointment to present his offer.
Negotiate: In order to prepare an offer, the buyer must not only determine the net equity of the foreclosure home taking into account all potential repair, closing, and lien costs, but can also attempt to negotiate with the lien holder if the remaining balance is high leaving a small equity position. Only after all of these possible figures are calculated can a home investor determine if the purchase would truly be profitable.
If the homeowner agrees to the investor’s offer, then they both sign an Equity Purchase or Real Estate Purchase and Sale Agreement. The investor should examine this document carefully to ensure no confusion about the terms and conditions of his purchase. There are specific clauses that should be incorporated into the contract in favor of the investor to protect your interests and prevent you from getting stuck with a poor investment.
Strategies for success
Whether you are a new to real estate investing or have some experience, to be successful in pre-foreclosure property investing, it's always advisable to work with a mentor. You may not have anyone in your immediate area willing to teach you how to be successful and that's where using a "virtual mentor" comes into play.
The Recommended Pre-Foreclosure Courses on this page are written by investors who "walk the walk" and have developed highly successful investing systems. You can shorten your learning curve and avoid many costly mistakes by using a "virtual mentor." Review each recommendation, make a choice and get started in this very lucrative niche of real estate investing in pre-foreclosures.
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