How to Buy a Pre-Foreclosure or Short Sale - By: A. Myers Kennedy

For many people facing foreclosure, the hit to their credit would be devastating. For this reason many welcome a short sale offer from a buyer. It is often a matter of getting the right price that works for both the lender and the buyer in a pre-foreclosure. Be prepared to deal with seller emotions and lenders requirements. Here are some more tips to help you find and buy pre-foreclosure properties.

1). Get pre-foreclosure listings: Pre-foreclosures are often the most elusive in the foreclosure family tree. You will need to search county records to find those properties that have recently gone into default. Another option is to look for homes that are listed as for sale by owner. If you are an investor, you should join a network of other investors to learn about more leads.

If you locate a property, you should take the time to study the neighborhood and get a feel for the area. Be cautious, most often with pre-foreclosures, the owners are still living in the home. If you do encounter the owners and want to establish a great relationship, then listen more and talk less.

2). There should be a trustee, usually an attorney that filed the original paperwork who can confirm if the property is still in default. Many times the listing may have been released just before the homeowner found a way to prevent foreclosure.

3). Get all the information available so that you can determine if this short sale is something you want to buy. The information you should get:

• Start by getting the estimated market value of the property.
• Find out how much is the outstanding loan balance.
• Are there liens or other loans on the property?
• Get a history of previous ownership of the property.
• As a homeowner, what will be your monthly expenses?

After you have compiled the deductions for outstanding loans, liens, and estimated repair costs, subtract that amount from your starting number (estimated market value). You will use the sum to negotiate your offer with the owner or lender.

4). Send a letter of introduction and ask for a meeting to discuss your interest in their property. Approaching the owner in person is not recommended. If the owner responds to your letter and calls, arrange a time to do a walk through of the property.

If this will be your home, make sure it fits what you want and need. If you are an investor, look for repairs that are needed. Since the property is in foreclosure, and you are buying it as a short sale, you will be buying it “as is”.

5). Let the homeowner know you understand their situation and want to make this as easy as possible. You’re offering to help them and offer some ways that may entice them to consider your offer over other alternatives. Consider letting them stay in the house for a set period of time, if this is an investment property for you, set them up as renters till you’re ready to resell, if they have equity in the property that the liens aren’t showing, an offer to split the equity could give them cash to walk away with and you still get the property below market value.

6). If the owner is open to your offer to buy their house as a short sale and keeping them from foreclosure, it’s time to settle on a purchase agreement. Your goal should be to buy the pre-foreclosure for 80% of the market value or less. Consider in your offer appreciation of real estate in the area and how much the house’s value will increase after making the repairs you’ve noted or any improvements to the property.

After you and the buyer have come to an agreement, contact the lender and any other lien holders and advise them of your intentions to buy the property. Ask what the bottom dollar the lender will accept is. Sometimes they are willing to negotiate a lower payoff than the debt shows. You may want to get a realtor’s assistance here as they have experience in dealing with lenders and short sales. Realtors who specialize in foreclosure and REO properties are extremely beneficial as they often have working relationships with most lenders.

In some cases, the loan in default is an assumable loan, meaning you can pay the default amount of the loan and take current terms of the loan as the buyer has in place. If it’s not assumable, you will have to pay the full amount owed and you will have to verify and clear any other loans or liens against the property.

The most important point is to get everything in writing. This too is where an experienced REO or foreclosure agent can be helpful. If you have your financing secured, the rest of the purchase should go smoothly. A third party such as an escrow company can manage the transfer of money and property ownership (handing over the keys). Pre-foreclosures or short sales can be a great purchase for a buyer or real estate investor, but buying during the pre-foreclosure stage can take a lot of patience.

About the Author

Trent Realty is the source for Florida REO and Florida foreclosures. If you are looking for Florida homes for sale or seeking investment opportunities in pre-foreclosures and short sales in Florida, Trent Realty is the place to go. Visit our website and view our listing of Florida REO and Florida homes for sale.

Article Directory Source: http://www.articlerich.com/profile/A--Myers-Kennedy/58204

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