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Checklist to buy properties in pre-foreclosure

By RealtyTrac | Published: Jul 28, 2010 | 32 Comments

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.

  1. Prepare your resources

    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

  2. Confirm property status

    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.

  3. Evaluate bargain/investment potential

    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.

  4. Contact the owner

    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.

  5. Negotiate a purchase agreement and close the deal

    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.

Comments

By Carla King,  Tue Aug 31 2010, 22:44
Even though you may get a good deal, you will have to get lender approval from the lender holding the note. This may prove to be difficult and may take a long time if at all. You need to work with a REALTOR who is experienced in completing short sales.
By Becky Morrill,  Mon Oct 4 2010, 07:31
A SHORT SALE IS WHEN A HOMEOWNER OWES MORE ON THEIR HOME MORTGAGE (LOAN) THAN THE HOME IS CURRENTLY VALUED AT, AND THE HOMEOWNER CHOOSES TO SELL THEIR HOME AT CURRENT MARKET VALUE – AND REQUEST OF THEIR MORTGAGE LENDER TO “FOREGIVE” THE DIFFERENCE BETWEEN THE CURRENT REMAINING MORTGAGE BALANCE AND THE CURRENT MARKET VALUE. THE REQUEST FOR SHORT SALE APPROVAL FROM THE HOMEOWNER’S MORTGAGE LENDER BECOMES AN ADDITIONAL “CONTINGENCY” WITHIN THE PURCHASE AGREEMENT BETWEEN THE HOME SELLER AND HOME BUYER – ALONG WITH THE NORMAL CONTINGENCIES LIKE: INSPECTIONS, DISCLOSURES, APPRAISAL, BUYER’S LOAN APPROVAL, AND SUCH. TYPICALLY, THE CONTINGENCY TIME-FRAMES DO NOT BEGIN UNTIL WRITTEN SHORT SALE APPROVAL IS ISSUED BY THE SELLER’S MORTGAGE LENDER. THE SHORT SALE APPROVAL CAN TAKE WEEKS TO MONTHS TO OBTAIN. SHORT SALE LENDERS WILL EXPRESS THAT THEY ARE UNDERSTAFFED AND EACH NEGOTIATOR OR MEDIATOR HAS “HUNDREDS” OF FILES AT THEIR DESK, AS WELL AS SYSTEMS AND PROCESSES TO BE MET. SELLING OR BUYING A HOME IN THE SHORT SALE PROCESS IS AN EXERCISE IN PATIENCE FOR THE HOME SELLER, THE HOME BUYER, AND THE REAL ESTATE AGENTS. SOME SHORT SALE REQUESTS ARE EVENTUALLY DECLINED; YET MANY ARE BEING APPROVED, AND THE HOME SOLD. CHOOSE YOUR REALTOR AS CAREFULLY AS YOU CHOOSE YOUR NEXT HOME; THE CHOICE IS YOURS.
By Jenny Talasazan Realtor,  Wed Feb 23 2011, 21:28
I have written a book on short sales that I offer for free on my site. A short is when there is a hardship and the bank takes less then what the home owner owes. My book is not for tax or legal advice but will allow you to get clear, orderly, relevant information that you may read at your own pace.
By Doityourselfbuyer,  Fri Apr 22 2011, 04:55
Its funny this post was about owners and potential buyers negotiating .Real Estate agents were only mentioned once ,yet they would have you think they are as essential as ink. In pre - foreclosure there is no need for a realtor.The realtors hope homes go to short sale so the lenders will hire them to sell off properties.Homeowners keep your %....and sell yourself especially if notice of default is on file........get out while you can and save your credit....
By Remi Hudson,  Mon Jun 27 2011, 04:59
YOU DO NOT NEED A REALTOR. Why would you want to reduce your profit potential? Realtors need to get onboard fast. Their jobs are going the way of the dinosaur.
By Kevin B Tolbert PA Team,  Sat Jul 16 2011, 20:04
TO all of the above:

This site is a true sham and scam and only here to solicit unsuspecting sellers to list with them and unsuspecting realtors to pay them for the leads of these desperate sellers.

The PROOF is in the listings that they posted on Trulia in order to link you to this site where they just tried to sell me the leads namely the contact info to many of the nice sellers above.

As a Real Estate Professional specializing in Tradition and the Town Park neighborhood, I can state with written proof for anyone that wishes to see it in writing, there is NO LISTING ON WALDORF COURT for $67,000. There never was and most likely never will be. This neighborhood starts in the $150,000 range and goes up from there. Latest sale was just $349,000 just a month ago for the same home listed on this site for $67,000.

And just a side note to Remi Hudson, you don't have POTENTIAL PROFIT in a short sale. The definition of a short sale is a sale where the value or equity of the home is lower than that mortgage securing the home and the lender is willing to accept a lower payoff than the mortgage. There is NO PROFIT to a short sale. You can read all about the various short sale types and all the latest ACCURATE information on my Blog: http://actvra.in/8hd

Realtors are an essential part of the short sale process and by no means do they get rich off short sales as the lender pays their fee and caps it at a fair market rate. The SELLER loses nothing but gains years of experience, years of expertise, experienced negotiators, and someone to walk you thru the process from start to finish. Realtors also know the different types of short sales, the reasons to qualify for a short sale, and how to negotiate you out of a deficiency balance or note to the lender thus SAVING YOU THOUSANDS of dollars from your future income and all at NO COST to the seller. So the next time you think you should go it alone, maybe knowing all the facts might just make you think twice. The banks are the sharks, and the realtors are your only line of defense before foreclosure and potential bankruptcy. Read my blog and you decide who knows more about short sales... me or yourself. And just remember, even a skilled Orthopeadic Surgeon doesn't perform a root canal and do you know why? Because it is not his expertise. I don't do plumbing, because it's not my profession. I do however save many homeowners each year tons of money, future income that would have gone to defiency judgements, and I even get some homeowners free cash from the lender to relocate in certain types of short sales. So read my blog, become informed somewhat, and then call an expert.

Kevin Tolbert, PA GRI
Certified Distressed Property Expert
Keller Williams Realty of the Treasure Coast
Email: kevinbtolbert@kw.com
Telephone: 772-834-0099
By Tammyea,  Mon Aug 1 2011, 18:53
Wow, I really learned alot from reading your post. I recently found a house I wanted to buy and before I could see it and make an offer it was removed from the market because of a title issue. The house is in forclosure and the listing realtor cannot tell me much of anything about how long it could take. Got any advice? Thanks.
By Drolgaflores1,  Sun Aug 7 2011, 08:22
I would like a listing of short-sales in Cameron County ... what is the website?
By Cameron Adams,  Wed Aug 31 2011, 21:43
realtores are not needed in any type of sale , only if you waNT to over pay by paying the commission to a realator. The people who dont agree with this are the realators who livelyhoods depend on you believing them. I have boughl real estate for 30 years never using a realator, they only get in the way because they want to stick thier greedy ;little fingers the middle so they caN inmake the payment on thier new merecedes.
By dixon650565,  Sat Oct 8 2011, 17:49
This home sale is still pending. I"m wondering, how long can it stay pending. If the deal falls through, I want to buy this place. Sure, it needs fixing here and there, but I can to that.
By Marianne Dunlap,  Thu Jan 5 2012, 16:20
I am amazed how so many of you out there are so uneducated about Realtor's and what they do for you. why do contractors and investors who purchase millions of properties use Realtor's??? They Represent Buyers for FREE! They negotiate your purchase they write contracts to protect you. You want to buy on your own it makes no sense. If your a Seller & if you are smart you have an agent to put your property on the mls and pay these agents to protect you....with proper paper work and knowledge of what you need to know.to close safely and without harm. Your Welcome to sell on your own, you'll just end up paying an Attorney a lot more money if your Buyer decides to sue you. Talk about a greedy bunch...and please Realtor's it's spelled this way Good Luck to all of you.I wish you all a great new year....
By Natasha Nikolaeva, Realtor,  Tue Jan 31 2012, 20:07
To Kevin Tolbert: Thanks Kevin, nice to know that there are other people who understand what this site is about. In short: to collect money from Realtors for leads and for unsuspecting Sellers and Buyers to become these leads.
Natasha Nikolaeva
Bailey Properties Inc
831.818-6605
http://www.natasha4sold.com
By Ignorant,  Tue Feb 7 2012, 14:49
Have bought and sold 4-properties as an ignorant home owner.
Made my own sales agreement from Staples (sale by owner) What buyer agrees with seller to keep, Negotiate sales price. Send to Title Company for clearing of title. Then to an escrow company who handles the price and processing of all paperwork . No 2-6% commission. Just leg work as the realtor does and charges handsomely.
By Buyer123,  Mon Feb 13 2012, 10:18
To use a realtor or not???
I have bought 7 homes in 3 states.
It comes down to this;
If you have the time do to the work... it is not hard, do it yourself.
If you have the money but no time... use a realtor.
As the price of the home goes up, the cost of using a realtor goes up.
The decision is, How much is your time worth?
By Leesr11,  Mon Jul 23 2012, 12:32
How about a listing in Georgetown County.
Thanks
By Claire Morris Dobie,  Thu Aug 16 2012, 12:13
Can you by a home in pre-foreclosure using a VA loan, if pre-qualified?
By kpeirce,  Wed Sep 26 2012, 07:39
This house is garbage. The bank wanted $150K then they do $3,000 worth of work to the hazardous waste on the lot and jack it to $245K....you can buy a gorgeous move in ready home for less! You gotta be a nut to purchase this shack.
By Sonia_bq,  Mon Nov 12 2012, 17:30
hola alguien habla espanol me gustaria saber como se debe hacer si alguien quiere comprar al contado una popiedad como un condominio o un apartamento. en l zona de gaithersburg como debe uno seguir los pasos.
By Peter,  Fri Dec 21 2012, 11:09
I use realtor in two reasons

1. I am foreign investor and having launguage problem.
2. many govermant owned or bank owned houses still need licensed broker to work with and not talking to homebuyer directly .
By Paula Tilley,  Wed Jan 23 2013, 22:12
Buyer BEWARE!!!! 8800 RIDGE ROAD, NEWCASTLE, CA. I have lived at this property for over 8 years. The home is ALL ELECTRIC!! PG&E bills can run over $1500.00 A MONTH in the WINTER. JPMORGAN CHASE FORGED DOCS on the title and US BANK claims to be THE OWNER now!!! Yes I am angry over the lies that were told when I bought this home and more lies when I tried to SHORT SALE it and MORE LIES from US BANK and NAIMAN LAW GROUP when they FORECLOSED !!!!
By Scollette74,  Thu Feb 14 2013, 09:10
What is the easiest way to obtain a list of foreclosures in my area? I live in Middle Tennessee.
By rosaintheattic,  Thu Apr 25 2013, 09:47
We have been turned down by the banks and mortgage lenders. We are looking for a home large enough to raise three grandchildren in. I have a couple of small bills to pay off. Since I have chosen to pay cash for almost everything I have a lack of credit to balance out the bad on my credit reports. If anyone knows someone in the Sedgwick County Ks area that is willing to take a chance on a good person that is in the process of getting this taken care of but needs a little time, please let me know at rosaintheattic@gmail.com.. Would love to hear from someone that is honest please. I need a 3-4 brm and 2 bath home if possible. Would love something a little in the country if I can find it. Maybe just a dream but hoping someone will take a chance on me.
By FKane,  Sat Apr 27 2013, 10:16
My house, which is featured on this site as a foreclosure listing, is actually NOT in foreclosure, and never has been. I purchased it almost three years ago, as a short sale, and it is not on the market, foreclosed or otherwise. So, all I can say is: don't trust anything you see on the web. Get yourself a realtor -- they have access to current listings, including short sales and foreclosures -- and skip the Trulia and Zillow listings, which are inaccurate and misleading (in my experience).
By Laura Butler,  Mon Apr 29 2013, 13:52
Realtors make there money by charging the seller, which naturally inflates the home cost for the buyer.
By Elizabeth Randolph,  Fri Jul 19 2013, 12:15
So if you are interested in a pre foreclosure home what is the first step. Do you get prequalified or is it possible to get a FHA Loan.
By johnsonfrederica22,  Fri Aug 2 2013, 22:51
Neither seek a good and reputable realtor with fantastic listings and cmas.
By Semaneves,  Wed Nov 13 2013, 03:57
I'm a senior American Citizen and will get a inheritance from Brasil that will aloud me to buy a home up to $150,000.00.I woul like to by it near the ocean in Miami Beach or North Caroline Beaches.
Do I have a chance to buy it cash? How could I bring the money?
sema neves
By Voices Member,  Tue Jan 21 2014, 16:40
This site is very neglegent!!!!!!!! There is a listing on here of my neighbors home and the picture is of MY HOME!! Major BS!! SOMEONE WILL ANSWER TO ME IN THR MORNING!
By Markus Yeargin,  Tue Mar 11 2014, 19:48
I'm a real estate agent and understand how people would be frustrated by the thought of paying a commission to sell their home. I'm a business minded person and hate spending money, I can sometimes be accused of being cheap. I tried to save a few dollars by going with the discount guy to update our bathroom. The grout is now falling apart and the work quality was very poor. We'll have to have it done again soon because I "saved" a few dollars. I tried to save money by having my wife's car repaired at the discount place. She drives a Mini, you really shouldn't do that. We ended up having to take it to the specialty repair shop after all because the discount place didn't know what they were doing. I couldn't even buy a bed without troubles. I tried to go cheap and the piece of junk was uncomfortable, noisy, and hard to sleep on. I wouldn't listen to the salesperson because of course I felt he was just trying to sell me a more expensive bed.

The bottom line is there are good and bad professionals in every industry. We would like to believe we can save money with our purchases and services because we know what we are doing and the salespeople are just trying to make a buck. The truth is real estate professionals do provide a great service, you just have to find the good real estate professionals who are good at what they do and who have your best interests in mind when helping you buy or sell a home.

I'm finally starting to realize myself that when I am purchasing anything or looking for services, I need to find someone I trust and listen to what they say. Otherwise I'm doing myself a disservice and probably looking as bad as some of the clients I've tried working with who think they know more than I do about what I do for a living. I don't mean any disrespect to anyone reading this because unfortunately I've been that guy as a consumer, luckily my life experiences are finally starting to open my eyes. Some people have the expertise to buy or sell on their own, but most do not. I doubt a surgeon would cut out his own wisdom teeth. He'd go to a dentist. They kinda specialize in that sort of work. GOOD LUCK OUT THERE!
By Dguerriero,  Tue Apr 1 2014, 20:21
I am in Las Vegas and need help to buy a one story small home only in a nice area of two specific zip codes. There are very few of these and less with a pool which is desirable for me to have in hot Las Vegas summers. Now I am wondering if these usually small homes have already been bought by cash paying large investment firms who then rent them out? If so, would I need to be buying homes in foreclosure? Since I need to use a mortgage to buy, while the investment firm uses cash, will I always lose out?. A strategy to follow would be helpful to me now. So far I've been reluctant to contact an agent as I have the feeling one will waste too much time on trying to sell me on home that I do not want. For example a two story home or one not in my preferred area. I won't buy if the home does not meet my requirement since I can continue to rent.
By Elig108,  Wed Apr 16 2014, 19:08
what a horrible real estate web we weave! I'm just starting )again) to be looking for a property and repelled by the greed and dishonesty the process seems to bring out in all the players. Here in California, I'm praying for a MAJOR earthquake; it'll lower prices; a plague on all their houses!! (until I get mjne!)_

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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 ...

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