Pre Forclosure?

[Chris StPeter]

What is a Pre-Foreclosure? On Zillow they always have Pre-Foreclosure Auction listings. Can someone please explain how this works? Thanks

[Bill Gulley]

The good title to this thread prompted this comment;

Beware of recent federal laws concerning dealing with people who have received a notice of foreclosure, the FBI is active in chasing down scammers and investors that approach owners with some "I can help you" angle. 

Dealing through an agent is fine or an auction where you are not communicating with the owner. 

Providing an insured lending institution with false or misleading information falls under bank fraud, an error is one thing, intentionally giving such information is another. Any party that creates or gives such information does not have to profit from their acts, or be successful in a transaction.  An attempt to cause a loss to a bank is all it takes. Interrupting banking operations in a foreclosure can also fall under bank fraud.

We still have gurus, mentors or coaches spinning old pre-foreclosure tactics targeting these owners, simply targeting an owner, like direct marketing, can cause serious issues. There are only three types that are allowed to approach these owners, attorneys, agents and HUD approved credit counselors, if you're not one of these be very careful, best to avoid them if you are a newbie because what you say can hurt you.

And, these deals are not the big profit centers they seam to be, many are underwater, most with little equity and condition is usually an issue. It takes more than a motivated seller to get a good deal or even a decent deal.

No law enforcement agent or other agency is going to believe that you attempted to enter into any business transaction to help the owner, regardless of how you "feel" so don't even go there, making claims your proposed or closed deal was/is a win-win, falls on deaf ears and is an indication that something in the mix is predatory. The fact is, parties deal in their own best interest. 

In pre-foreclosure offers, you better have the intent to close as the contract states and have the ability to close, there absolutely is no wholesaling BS with pre-foreclosures. If a lender receives a contract they will likely delay activities toward foreclosure but usually will not go past any sale date. This disrupts banking operations and requires the bank to process the contract and follow up.   

Now, reread the third paragraph!

See an attorney before you file any lien or encumbrance to title on a property in pre-foreclosure, that too can be interference with a foreclosure!

Any investor contacting an owner in foreclosure is entering a mine field, all it takes is for the owner tell Aunt Mary to tells Uncle George who has a real estate license or asks someone else who has seen the FBI public announcements about foreclosure scams. The first inclination will be that the owner is getting scammed, then you'll have to show you're not. Be prepared to go the full round for the knock-out. And, if you mislead the owner as to the value, their credit or other financially related matters, Lord help you. :)