How to Buy From the Bank on Pre Foreclosure

Whether you desire to purchase real estate for investment or personal purposes, there are a number of different market options available to you. You are not restricted to purchasing real estate on the traditional open marketplace. One viable alternative to consider is buying real estate in pre-foreclosure status from a bank.

Things You'll Need

• Contract for sale
• Inspection reports
• Title to real estate

Instructions

1. Develop relationships with professionals in real estate, such as mortgage lenders, mortgage brokers, real estate brokers and appraisers. These are all individuals involved in or associated with properties in pre-foreclosure status. These relationships are important because banks and other lenders generally are legally prohibited from publicizing the fact that a property is in pre-foreclosure. Therefore, you need to learn about potentially available real estate through relationships you develop in the industry.

2. Identify a property that is heading towards foreclosure with the assistance of your professional network.

3. Contact the bank or other mortgage lender and express your interest in making an offer on that particular property. A telephone call suffices at this juncture.

4. Ask a representative if the bank will discount the existing loan. Discounting a loan is a process through which the lending institution is willing to reduce the balance on the loan to allow for a sale of the property at a more favorable market price. Loan discounting assists all parties to the transaction, including the bank because it does not have to expend money and take the time to pursue a foreclosure.

5. Make an offer on the property, taking into account the potential for a discount of the current loan and the savings to the institution by unloading the real estate today rather than at some point in the future after a lengthy foreclosure process.

6. Initiate all necessary inspections on the property before the closing date on any contract for sale. These inspections include electrical, plumbing and structural.

7. Close on the deal provided the inspections are satisfactory.

Tips & Warnings

• Consider engaging the services of a real estate broker with ties to the mortgage lending industry. Again, gleaning information about properties in pre closure through professional networks is crucial. Many real estate brokers maintain these types of connections to a significant degree.

• Make certain you have thorough inspections of the premises. The reality is that many properties heading to or in foreclosure end up experiencing what is known in the real estate industry as waste. The owner fails to maintain or repair the premises because she knows she likely will lose the property. Thus, the property wastes and falls into a state of disrepair, including in areas that might not be immediately noticed.

References

• "Short-Sale Pre-Foreclosure Investing: How to Buy "No-Equity" Properties Directly from the Bank -- at Huge Discounts;" Dwan Bent-Twyford & Sharon Restrepo; 2008
• "The Pre-Foreclosure Property Investor's Kit: How to Make Money Buying Distressed Real Estate -- Before the Public Auction;" Thomas Lucier; 2004
• Business Dictionary: Distressed Property

Resources

• Distressed Property Institute