May 7, 2012
By Daren Blomquist, RealtyTrac Vice President
The foreclosure process allows for three different bargain-buying opportunities: when the property is in the pre-foreclosure period, typically a short sale; at the public foreclosure auction; or when the property is bank owned, also known as REO.
a quick checklist to follow if you are interested in purchasing a
pre-foreclosure (NOD, LIS) property. In the 2012 market, these
properties are typically short sales because the homeowners owe more the property is worth.
In separate articles we also cover how to buy at the foreclosure auction and how to buy bank owned homes.
1. Prepare your resourcesÂ Â Â Make
sure that you have the resources in place to purchase this property.
Secure pre-qualification for a loan if you havenâ€™t already and enlist
the help of a buyerâ€™s agent if youâ€™re not comfortable contacting the
owner or listing agent and navigating the negotiations and closing
process on your own.
2. Confirm property status Â Call the trustee or attorneylisted in the Contact Information
section of the property details page on RealtyTrac to confirm that this
property is still in pre-foreclosure. Owners in default can stop
pre-foreclosure by paying off the amount owed (called reinstatement) or
by selling the property. If you are a RealtyTrac member, you can also sign up for Property Watch email
alerts from the property details page to be alerted immediately by
email if the foreclosure status, auction status or market status of the
3. Evaluate bargain/investment potential Â Determine
if this property represents a good bargain or investment opportunity.
If the property is listed for sale, a good place to start is to compare
the List Price to the propertyâ€™s Estimated Market Value.
If the list price is lower than the market value, the property could
represent a bargain purchase. If the property is not listed for sale,
youâ€™ll want to look at the Sales Trends section on the RealtyTrac Stats & Trends page to see the average foreclosure discount
that foreclosure buyers are getting in the surrounding zip code. That
will give you an idea of the type of discount to reasonably expect on
4. Contact the owner or listing agent Â If
the property is listed for sale on the MLS, you or your buyerâ€™s agent
can simply contact the listing agent. If the property is not listed, you
or your buyerâ€™s agent will need to contact the owner in default to
express your interest in the property. Check under Contact Information on
this report to find contact information for the listing agent and
owner. RealtyTrac members can mail customized postcards to distressed
homeowners via a dynamic online interface.
5. Negotiate a purchase agreement and close the deal If this owner is interested in selling during pre-foreclosure
(which is beneficial to the ownerâ€™s credit and allows the owner to walk
away with something to show for any equity), then youâ€™ll need to
negotiate the terms of the purchase, enter escrow and close the deal
before the property is scheduled for public foreclosure auction.