Five Steps to Buying Pre Foreclosure Properties

Adjustable-rate mortgage

The first step to buying pre foreclosure properties is to search in several different places.  The first thought for many would be to search the internet, although this easy and often times reliable place, it is not the only place you should limit your searching to.  Search in the neighborhoods where you would like to purchase for homes that look abandoned and find the owner information to determine if the property is being foreclosed.  Check the newspapers daily for homeowners who are listing their homes as being close to a foreclosure and call a few real estate offices to inquire about short sales.

Step One: Verify the Pre Foreclosure

The first step when you find pre foreclosure properties is to contact the owner to determine if the property is indeed in pre foreclosure status or if they have redeemed the property.  Visit the neighborhood where you are considering buying pre foreclosure properties so you can get a good idea of the neighborhood and what the other properties in the area are like.  This is very important if you are utilizing the internet as your primary source for searching available properties.

Step Two: Market Value

The second step is to determine what the market value of the property is.  This can often be done by contacting a property investment company and inquiring about the exact property address or homes that are in close vicinity.  You can also visit the courthouse to find the market value of the property you are considering.   Also, find out about any liens that may be held against the property as well as how much the borrower owes on the lien.

Step Three: Contact the Owner

Step three is to contact the properties owner.  If possible, contact them through email and wait at least three days to see if you get a response.  If someone still has time on their redemption period, he may not respond, however, if it is someone who is very close to the date of foreclosure, they will most likely respond immediately.  It is not recommended that you visit them in person or telephone them before emailing or sending a letter through the postal service as some people may be offended at the offer.

The goal of Forex investment companies is to buy low and sell high, the same concept applies to buying a pre foreclosure property.  You want to get the lowest price possible.  Negotiate the deal with the homeowner and the lender.  If the property is close to foreclosure, you may be able to buy directly from the homeowner at the price for which they owe on the mortgage.  In many situations, this could be well below market value.

Step Four: The Purchase Agreement

Step four is drawing up the purchase agreement.  If you are not comfortable doing this between yourself and the homeowner, it may be beneficial for you to get a real estate agent to help you with all of the paperwork and finalizing the deal.

Step Five: Stay On Budget

Step five is to remember the primary rule when shopping for a new home, create a realistic budget and stick with it.  When buying pre foreclosure properties, there are going to be opportunities for fantastic bargains, however, it is not unusual for these properties to require a lot of repair work.  If you have a set budget for the purchase of the property as well as for any repairs you may have to get, going outside of the budget for the purchase will cost you in repair funds.  Also, keep in mind that just because you find a property that is, for example, 50% below market value, does not mean that it is the deal of the century.  This homes repairs may cost you will over the 50% you saved, therefore defeating the purpose of buying a home below market value.