With a pre-foreclosure sale, you may be able to work with homeowners and get a good price on your new home.
As a prospective homebuyer in the U.S. who is interested in affordability, you may have considered buying a home from someone who can no longer make the mortgage payments and is therefore being foreclosed upon. It is important to understand, however, that the foreclosure process involves many phases, with differing implications as to who you would be dealing with and just how good a financial deal you might get. There's a narrow window of opportunity in which one might buy a property from a homeowner in financial distress before actual foreclosure proceedings have occurred; this is called pre-foreclosure.
If you are interested in a pre-foreclosure sale, you need to know how to find them and how to work with homeowners. You may be able to help a homeowner avoid foreclosure and get a good price on your new home.
Finding pre-foreclosure sales
So, how do you find out about a pre-foreclosure property? This information is publicly available, even if the homeowner hasn’t listed the property for sale. Online services such as RealtyNow can direct you to listings where you can find compiled information on homes in pre-foreclosure, foreclosure, short sale, REO and regular sale (MLS) from public records. This allows serious homebuyers or investors to easily locate and approach the defaulting homeowners to make an offer.
Another way to purchase a home in pre-foreclosure is by auction. Typically, a homeowner who has missed at least one payment and gets a Notice of Default (NOD) from their mortgage lender, will have their home go into pre-foreclosure. If the homeowner cannot make the delinquent payment or continues to default on the mortgage, he or she will also receive a Notice of Sale (NOS), which sets an auction date for the home. You may buy a home in a pre-foreclosure sale up to the day it is auctioned.
Both the NOD and NOS are filed with the county court and published in the local newspaper, alerting you to opportunities for a pre-foreclosure sale. Keep in mind that these notices do not indicate that the homeowner wants to sell. He or she is struggling to pay the mortgage. So, if you choose to inquire about the home, it is best if you send a letter or postcard rather than go to the front door. If you are working with a real estate agent, your agent may be able to research the property and contact the owners for you.
A pre-foreclosure sale may be a way to get a home for less than market value. You may also buy a home in a short sale. A short sale is when a mortgage lender agrees to let the homeowner sell the property for less than is owed on the mortgage because the value of the home has dropped significantly. In this case, the home will probably be priced close to market value, yet the price will be much less than what the homeowner paid. The lender must approve your offer in a short sale.
A pre-foreclosure sale can have many advantages. One is that the homeowners are motivated to sell in order to avoid foreclosure. A second advantage is that a home in pre-foreclosure will still have their utilities working, which facilitates the inspection process. Getting an inspection on the home at all is a major plus, since you often will not be able to get one on foreclosed homes at auction. Another advantage is that pre-foreclosure sales often have less competition from other buyers than those at auction. Your sale may have no competition if you or your agents contact the homeowners personally before they list the home.
Home pre-foreclosure sales are listed with real estate agents or on for-sale-by-owner websites. You may also notice a sign in a home’s yard. The U.S. Department of Housing and Urban Development (HUD) has many pre-foreclosure programs as well, to learn more about HUD, clickhere.
To learn more about pre-foreclosure sales, go tothis article. It provides more information about how you can find these homes, how to contact the owner and financing options. If you want to learn how tofind foreclosure listingsand buy foreclosed homes, this guide will definitely help.
A real estate agent who specializes in foreclosed home sales and pre-foreclosure sales often knows about foreclosure listings before others. If you need help finding an agent or you want to look at your local real estate listings, enter a zip code above.