How to determine if a pre foreclosure is a deal

[Jeet Sangha]

Pretty much what the subject line says..

What elements do I need to pay attention to see if a pre foreclosure property can yield profit. And is realtytrac a good source for pre foreclosures?

Basically I want to learn everything about it and feel confident about my numbers before I start knocking on doors.

Any bit of advice is appreciated.

I'm in California if that makes any difference.

[Rick Stein]

by "pre foreclosure" are you referring to short sales? The challenge with these types of properties is merely because the home owner signs the agreement of sale, that does not mean you have a deal because it is subject to lender approval which can take months, tons of frustrating paperwork and, even then, the lender may not approve the sale. In addition, the lender also wants to have the property listed in the local Mls, so they feel the property has been exposed to the market and it is an " arms length" transaction, or, to put it differently, that they are getting fair market value. I know there are investors who do quite well with short sales but they usually have a team which includes someone who negotiates with the lender. I am both a real estate broker and investor for 30 years. I, personally, stay clear of short sales for the reasons I explained above. I have been an REO agent for almost that long and have purchased many along the way. I also send out a great many yellow letters and much prefer to sit down with a home owner over a cup of coffee and hash out a deal privately that benefits both of us. In this scenario, if the homeowner signs the contract, we have a deal that is not contingent upon a third party approval. I hoe this long winded answer to your question helps.