| The advantage to buying a property at a foreclosure | | | | or the other party has left the relationship (and |
| auction is that you can often pay far less than you | | | | possibly the area), a transfer of property requiring |
| would have under normal circumstances. Frequently | | | | both signatures simply won't happen. Banks facing |
| you can invest in improvements and then sell the | | | | situations like this know that the foreclosure process |
| home for a much higher price than your cost. | | | | will take a long time, making them even more eager |
| The disadvantages and risks are more numerous. | | | | to sell the property if it eventually does become |
| Simply to participate in the auction you must have | | | | bank-owned. If you choose to, you can keep in |
| sufficient funds available (either cash or a cashier's | | | | touch with the bank and monitor the progress of the |
| check) to cover 10% of the purchase price. You also | | | | foreclosure. Eventually all formalities will take place, |
| must be able to arrange for financing within thirty | | | | and a sale will take place... but not at the |
| days to complete the purchase or you risk losing | | | | pre-foreclosure stage. Instead it will occur at the |
| your deposit. Next, you're buying the property as-is, | | | | auction or bank-owned stage.o Businessperson facing |
| without inspection. The condition of the interior of | | | | business collapse: If a business owner's |
| the home is usually a complete unknown. You'll have | | | | once-promising venture is failing, your offer to buy |
| to be sure that the price you pay is low enough that | | | | the property may be of interest. After all, you're |
| you can still afford to make significant improvements | | | | offering the individual a way out that is more socially |
| or repairs. | | | | acceptable than foreclosure. Business owners typically |
| Buying at pre-foreclosure has two main advantages | | | | are more realistic about cutting losses, selling assets, |
| over buying at a foreclosure auction. The | | | | and making other rational business decisions, no |
| homeowner may be desperate and may be willing to | | | | matter how personally painful. You won't know, of |
| do almost anything to avoid actual foreclosure. In | | | | course, whether you're dealing with this type of |
| addition, you can enter the property to inspect it | | | | person until you call and they offer the reason why |
| before purchasing, so you'll know exactly what you're | | | | they're in foreclosure proceedings... and the average |
| purchasing. For those reasons, pre-foreclosure | | | | homeowner probably won't be forthcoming.o Fiscally |
| investing is a wave many real estate investors are | | | | irresponsible homeowner: Easy credit has made many |
| now riding. | | | | individuals ever-hungry consumers... as long as people |
| Let's look at the pre-foreclosure process. | | | | will permit them to keep consuming. At some point |
| Pre-foreclosure purchases are in many ways similar to | | | | the parties that extended easy credit want to be |
| a normal real estate purchase: you negotiate with the | | | | repaid, and the homeowners find themselves in |
| homeowner, sign a contract, and proceed with the | | | | financial trouble. |
| transaction. The main difference is that instead of | | | | The main difficulty is identifying all the possible |
| the homeowner listing the house for sale (and | | | | obstacles to purchasing the property. The |
| thereby being willing to sell), you're finding potential | | | | homeowners can possibly have other judgments |
| homeowners to contact in order to try to buy their | | | | against them. They may not be honest and |
| house, often when they're under duress. | | | | straightforward in their dealings with you - a great |
| You can easily find homeowners in the early stages | | | | reason why you should always use an attorney to |
| of foreclosure by checking public notices. You can | | | | help you with any real estate transaction. |
| also go to the county clerk's office and read the | | | | The upside, of course, can be huge. Buying |
| postings. A public notice in the newspaper will list the | | | | pre-foreclosure properties can be a great way to |
| bank's attorney. You can contact the lawyer for | | | | obtain properties at bargain prices, and with a distinct |
| information. | | | | advantage over buying auction properties: You can |
| You can also contact the bank that originally made | | | | fully inspect pre-foreclosure properties. Remember, |
| the loan and speak to someone in the bank's | | | | the biggest unknown involved in buying auction |
| delinquent mortgage department. | | | | property is the condition of the house - since you |
| Or, if you choose to, you can also contact the | | | | can't inspect it before purchase, you have no real |
| homeowner directly to attempt to purchase the | | | | idea what it looks like inside... and in some cases you'll |
| property. Keep in mind, though, that in all likelihood | | | | be in for a nasty surprise after you've purchased the |
| the homeowner has already been contacted by real | | | | property. |
| estate agents and other investors. If you're | | | | When you buy a pre-foreclosure property you can |
| interested in buying the home to live in, you may | | | | inspect the house, and if necessary bring a |
| stand a better chance because homeowners in | | | | contractor in to provide an estimate, and create a |
| financial difficulty are likely to feel that investors and | | | | detailed and accurate summary of the cost (and |
| agents are out to "steal" their home. | | | | time) involved in refurbishing, rehabbing, or improving |
| With a little research, you may find a homeowner | | | | the property. |
| willing to sell their home at a bargain price. There are | | | | In effect investors purchasing real estate at the |
| as many reasons for foreclosure as there are | | | | pre-foreclosure stage can make an educated |
| individuals, but people facing foreclosure fall into | | | | assessment of the investment potential in each |
| several broad categories. Let's take a look at a few | | | | property - buying pre-foreclosures eliminates the |
| of them so you'll understand the situations you can | | | | guesswork. |
| be dealing with.o Absentee husband or wife: If one | | | | |