If you haven't acquired a taste for pre-foreclosure properties yet, here's a recipe to consider when planning your next real estate flip.
First of all, what are pre-foreclosures? Pre-foreclosures are properties that are just about to go back to the bank. The owners have defaulted on their mortgage, the bank or lender has officially notified them of the default by filing a notice of default (NOD), and depending on the foreclosure process in your state or region, the owners are now in a waiting period before the bank completes the process.
The owner is still in complete control of the property, but the lender will repossess if the owner doesn't rectify the situation. If the owner makes things right with payment or an agreement with the lender before the actual foreclosure occurs, things can go back to normal.
The time-period for rectifying the situation varies by state, and also by how ทาวน์เฮ้าส์มือสอง กรุงเทพ swamped the lender happens to be. During the last down-turn in the economy when banks were so far behind, some home owners were in "pre-foreclosure" status for two years or more, during which time they paid no mortgage payments, but remained in the house. As the rate of foreclosures fell off, the time for rectifying the situation tightened up again.
However, if the owner does not rectify the situation before final foreclosure - even if they are trying to rectify - the foreclosure will occur with no sympathy. Consider that lenders often have two different arms - one that's trying to foreclose, and the other that's trying to help rectify the situation. They don't often talk to one another, so whichever occurs first, wins.
This is important for investors to know. Just because they're working with a home owner to purchase the home before it goes into foreclosure, there is no absolute guarantee they can get the purchase done, recorded, and the bank paid off in time.
For this reason alone, investors should become very familiar with the time-frames of the foreclosure process in their location. The time-frames are very specific, and savvy investors can usually see if they have enough time to get the deal done, depending on when the initial notification of default was filed by the bank.
There are several benefits to buying pre-foreclosures. The top benefit is the price. In most cases, the owner has no choice but to sell the house, and therefore is more likely to accept a lower offer, as long as it does not put him upside down in his mortgage. If he accepts an offer that puts him upside down, then the situation becomes a short sale.
A short sale can be a wonderful financial opportunity for an investor, but once a home has gone into official pre-foreclosure status, there may not be enough time to complete the short sale. Investors should be aware of the short sale process, the foreclosure time-frames, and also be working with an expert in short sale negotiations anyway, just in case they come across a good pre-foreclosure situation that requires a short sale.
Along with the great prices that come with pre-foreclosures, investors also have the luxury of dealing directly with the owner without a real estate agent in between. This puts the investor in control of the sale, which allows them to get things done faster using their preferred resources.
Finding pre-foreclosures is not complicated, but landing them is not for the faint of heart. NOD filings are public, so it's easy enough to find pre-foreclosures. The hard part is picking up the phone and calling the owners and convincing them to hear you out. If you're not comfortable with the phone, you could send letters, but then you'll just be another whisper in the crowd among all the other investors who are also not comfortable with the phone.
Consider that for every fifty investors who see an NOD and deem it worth pursuing, forty of them will send letters, ten of them might call, and only about three of them will push until they actually reach someone. Of those final three, only one will follow up with any degree of consistency. As in any type of sales, 80% of successful pre-foreclosure captures occur on the fifth call or higher. Persistence pays.
A final benefit to buying pre-foreclosures is that when you compare them to foreclosed properties, you'll find there is less competition. If you're on-the-ball, you may even be the only person they're talking to about selling their home. You may be in the enviable position of counseling them to take your offer. You might even be able to offer them a cash incentive, say $5,000, if they sell to you at what they owe, just so they can get out without the foreclosure. When you can position this as a win for them, you'll end up with a great property to flip!
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