Considering Buying a Pre-foreclosure Home?

Some potential homebuyers are very attracted to pre-foreclosure homes for two reasons. They want to seize the opportunity to be the first buyer to place an offer on a house without a bunch of competition from other buyers. Also, buyers are looking for a “good deal” and they want to save money by paying less than the market value for a home. Unfortunately, for both of these reasons, while they may be valid to a home buyer, are not realistic. A “pre-foreclosure” is a hot topic lately and that's why buyers gravitate to them. Many homebuyers don’t understand what makes a home a pre-foreclosure. They just know that they find these homes listed on many popular websites, and they want to buy them.

What is Pre-foreclosure Home?

A pre-foreclosure home is a home that a foreclosure action has been filed against. It is not necessary for a foreclosure notice to be filed in the public records for a home to be considered as a pre-foreclosure but generally, the notice of default will be made a public record. A pre-foreclosure means that the home has not yet been foreclosed upon but the seller is delinquent on their mortgage payments. The seller has the option of making up the mortgage payments and bringing their mortgage current. If the seller remains in default and does not make up those delinquent payments eventually the home will be foreclosed upon and the lender will take ownership of it. Sometime these homes get sold to an company just prior to the foreclosure.

How to Make an Offer on a Pre-Foreclosure

The best way to buy a pre-foreclosure of is to help the seller to make up their payments then arrange to buy the home directly from the seller but this has its risks to a potential buyer. One problem with this is some sellers do not want to sell their home. Sellers many times don’t know how much they could get by selling their home in an open marketplace.

Where to Find Pre-foreclosure Homes

Most of the time, by the time a pre-foreclosure home is listed by a real estate agent is will end up being a short sale and the home will most likely be sold at its market value. The seller’s lender must approve the short sale for it to take place Lenders hire appraisers and other real estate agents to perform broker price opinions (BPOs). Some buyers would prefer to negotiate with the seller before the home becomes a short sale. Not every short sale involves a seller who is behind on their mortgage payments. Sellers can be current on their payments and still do a short sale because they have little or no equity in their home. An active agent in your community cam be a valuable asset. Just make sure you don’t get one right out of the list.

To find pre-foreclosures, buyers can search a dozen popular websites. Some foreclosure websites also publish pre=foreclosures. If you have some extra time, you can contact the homeowners to find out if any of them are interested in selling. Another option is to try to buy a pre-foreclosure as a short sale prior to the seller listing with a real estate agent. One easy way to find these types of homes is to target communities that were built during the real estate bubble, where many original owners remain. These are homeowners who are most likely upside down on their mortgages. Many of these homeowners are probably not delinquent. Keep in mind that when the home is listed for sale as a short sale, ethical real estate agents will expose the home to the greatest pool of buyers in the marketplace, which will no longer give you the edge. Most first time home buyers should not pursue pre-foreclosures but would do better to concentrate efforts on locating regular sales, foreclosures or short sales, all of which sell for about the same market value.