Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. It is during this time that an investor can typically make the largest profits and can negotiate a deal that may be favorable for all parties involved including the buyer, homeowner, and lender. The checklist below will help you navigate the process.
Make sure that you have the resources in place to purchase this property. This includes securing pre-qualification for a loan and enlisting the help of a buyer's agent, should you be uncomfortable contacting the owner and navigating the negotiations and closing process on your own
Check the history of notices and call the trustee listed to confirm that this property is still in pre-foreclosure. Owners in default can stop pre-foreclosure (called reinstatement) by paying off the amount owed or by selling the property. Or the property might be up for public auction if it's been in pre-foreclosure long enough.
Determine if this property represents a good bargain or investment opportunity. Start by subtracting the property's outstanding liens and loans from the property's estimated market value to determine the property's estimated equity.
Unless this property is listed for sale on the MLS (in which case you can contact the listing agent), you'll need to contact the owner in default to express your interest in the property.
If this owner is interested in selling during pre-foreclosure (which can protect the owner's credit and allow the owner to walk away with something to show for the property equity), then you'll need to negotiate the terms of the purchase, enter escrow and close the deal before the property is put up for auction.
If you're interested in investing in pre-foreclosure property, you should know that owners in default may not agree to sell until the last minute — sometimes only a few days before the public foreclosure auction. You'll need to act quickly and may even ...