Buying a preforeclosure from a wholesaler

[James Maher]

I talked with a wholesaler that has a preforeclosure under contract.  What steps can I take to ensure I'm not wasting my time and there aren't multiple liens on the property?  The rent coming in should be about double the mortgage so I'm struggling to figure out how it has become a preforeclosure and it has me worried that there may be more going on and they are just trying to sell it cheap.  I know I need to check the rent roll and all other due diligence, I just want to make sure that I don't get to the closing table and get hit with a bunch of surprises on the title.

[Rick H.]

Stop struggling as to why the owner is in foreclosure. 

If you would study foreclosure for your market state, you would have the confidence to deal with sellers directly. 

Along the way, you'd learn how to read the default legal paperwork. Contained in that paperwork is your answer.

In my state, CA, the foreclosure timeline is very clear. When the lender starts the process, a Notice of Default is recorded in the county where the property is located, along with a public notice in an adjudicated newspaper. 

Within this notice is part of your answer. It describes the "breach of terms" which the borrower has broken. Obviously, the most common breach is failure to pay installments from some period of time. However, the breach may be for another reason such as failure to pay property taxes, insurance or even a senior loan. Occasionally I've seen breaches over lack of maintenance. 

And the big one is called an "incurable breach" where the entire debt is called due and payable because of a balloon payment or death of last person on title for a reverse mortgage. (Henry Winkler and Ribert Wagner never tell people about that in their RM tv ads).