Buying a preforeclosure can be divided into 6 parts:
Finding an filing properties
Find a way to keep track of all the properties that interests you. You’ll find it important as it takes time to follow preforeclosure properties. After you discover a property online,it’s an excellent idea to drive by the property to get an idea of the property’s condition and the neighborhood type.
Confirm the pre-foreclosure status
It usually takes at least 2-3 months to reinstate the property by paying off the amount in default. The reinstatement stops the foreclosure process, so it’s important to find out if a property has been reinstated before proceeding. It’s best to call the trustee or attorney assigned to the foreclosure.
Research the possible bargain
Find out what you can get on the market and check out the estimated market value of the property, how much is owed and if the owner has any other liens on the property itself. This all public information.
Contact the owner in default
You or your real estate agent can contact the owner to express interest, but make sure you are prepared to buy. If the owner has listed it for sale, contact the listing agent. If it isn’t listed, try contacting them via mail. Usually they will not respond to the mail immediately, as they will have a few months between foreclosure notice and public auction, in which they will explore other options. If the owner rejects all attempts, you may be able to get the property during auction.
Negotiate a purchase agreement
Once you’ve made contact with the owner, you should meet with them for further discussion on the property. Make sure to walk through the property. Since most owners do not have the money to make repairs, you may have to be willing to buy the property “as is” but make sure to keep tabs on the repair costs to subtract from the total offer.
Owners may be more willing to work with you if you are flexible in helping them out, like letting them stay in the house a bit longer and pay you rent until they find a place to stay or you offer to pay their housing cost for the 1st month or more after they leave the property. There are many ways to work out an agreement. While negotiating the purchase agreement with the owner, you need to also contact the foreclosing lender and other lien holders. You will want to let them know you plan on purchasing the property. You may be able to negotiate a lower payoff to satisfy the debts owed, since you are saving them the trouble of collecting the debt owed them. Some foreclosing lenders and lien holder will clear liens on a property fore less than 100 percent of the amount owed.
The goal is to purchase the property at least 20 percent below full market value. When determining the final purchase offer, take into account the rate of real estate appreciation in the area and the potential for increasing the house’s value by making repairs and improvements.
Closing the deal
Once you’ve made an agreement with the owner in default, the foreclosing lender and other lien holders, you can place the agreement in writing. You may want to involve a local real estate agent or real estate attorney for help.