subject: The Potential in Preforeclosures [print this page] Before the property will be foreclosed, the bank will give the homeowner a grace period and it is called the preforeclosure. This happens when the owner fails to pay or is behind payments so the bank will initiate a foreclosure but the house can still be purchased or you can still sell it until the day of the foreclosure auction.
You as the homeowner, will still have a chance to avoid full foreclosure by putting the property up for sale at a public auction during preforeclosures or by reinstating loan to pay the default portion. There are also a lot of potential buyers who are willing to obtain a property especially at a lesser price. The foreclosure intent may have been served, but as long as it has not reached the actual auction period, you can still take advantage of the remaining time that you have to sell the property.
This is also a good time for investors to trace these homeowners, as preforeclosures can be a great chance to buy a property at a reduced value. If you are interested in getting a preforeclosed home, you will have to get in contact with the homeowner and let them know that you are there to help them. They will not only want to be bailed out from their foreclosure and other payments but they would like to prevent a bad credit record. Most homeowners will sell property just sufficient for them to pay off their mortgage and get back as much from their equity and avoid total loss.
This will not only salvage the homeowner from foreclosure and bad credit but this is also a great venture while maintaining the value of the property. So expect that you are not the only who's aiming to get these type of properties. There will be some competition since preforeclosures are known to be one of the profitable real estate investments but you should also anticipate that this can be time consuming. Not only are the homeowners flooded with phone calls and letters from bill collectors, attorneys and creditors but some may have just left town and it will be not be easy to track them. You may get hold of other owners but you will also have to convince them to sell the property to you.
The only way to contact the homeowner is through mail, phone or in person. As soon as you track down these owners, start by sending them a letter of intent to buy their property and that you can also help them with their current financial difficulties. Let them know that you can stop their home from foreclosing, you can help them pay the bills and at the same time, salvage their credit rating. Show compassion and empathize with the homeowner and act professional in all your correspondence. Give them several weeks to assess their options and if you have not heard from them, you can try and follow up with another letter.
You may also give them a call and you have to be courteous, patient and never pushy. If you get hold of the homeowner over the phone and it looks like you can help them out, ask if they will agree to meet with you face-to-face. But before you meet with the owner you will need to asses if the owner is only after the money. Or if they are willing to file bankruptcy if they don't get what they want or they are just simply waiting to bail them out of their dilemma? As these questions are imperative in deciding on how you can assist them.
Find out if there are existing liens associated with the property and review their loan and mortgage documents. You will also have to inspect the home, do your evaluation before making an offer. There is a great potential in making it big in preforeclosures but the only drawbacks are the amount of time and proceedings. So before you start delving in to preforeclosures, make sure that you have the right property to begin with by finding out the market value and minus the default amount to determine if the gross equity is indeed large enough to be considered a worthy investment.
