How to Buy a Pre-Foreclosed Home
When a homeowner fails to make his mortgage payments, a lender files a notice of default with the county authorities. This begins the foreclosure process. The home will be in pre-foreclosed status until being sold at the county sheriff's auction. The homeowner usually has two to three months to reinstate his mortgage by paying the past due amount, selling the home, or using other available options to remedy the problem. Buying a pre-foreclosed home requires several steps.
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Instructions
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Instructions
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Get pre-qualified. Call several lenders to check their lending rates, terms, and conditions for loan approval. Choose a lender and apply to become pre-approved for a mortgage. This process gives you a rough estimate of how much money you are approved to borrow. Getting pre-qualified also helps you in the bargaining process. According to the Reality Trac website, if you are uncomfortable about buying a home without professional assistance, contact a real estate agent with experience in purchasing pre-foreclosed properties.
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Search for a property. Contact real estate agents, banks, lending institutions, and mortgage brokers to assist you in finding a home with pre-foreclosed status. Check the public records of pre-foreclosed homes available at your county courthouse, as well as websites that list pre-foreclosed properties by city, state, and most recent listings. Your local newspaper also prints pre-foreclosure listings in the Notice of Sale section.
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Contact the homeowner. When you find property you are interested in, contact the owner. Some owners are eager to sell their home if they cannot their bring the mortgage payments up to date, which gives you an opportunity to buy the home at a bargain price. Send a letter to the owner and state your interest in purchasing the pre-foreclosed home and working out a purchase agreement. Because a homeowner in default on his mortgage usually searches for all possible remedies, he may not respond immediately to your letter. In that case, send another letter in two weeks. If you don't get a response to your letters, consider calling or going to the house in person.
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View the property. Once you have succeeded in contacting the homeowner, arrange for a meeting to discuss the details and view the property, inside and out. Obtain as much information as possible from the owner. A pre-closed home is often in need of repair. Other items to negotiate include equity in the home, financing, and renting. According to Realty Trac, if you are purchasing the home as an investment property, consider letting the homeowner stay and pay rent until you sell the property. Offering benefits to the owner increases your chance of purchasing the home.
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Negotiate with your lender. Inform your mortagage lender of your decision to buy the property. When a pre-foreclosed property is sold, the lender benefits by avoiding the costs associated with going through the entire foreclosure process. As noted on Realty Trac's website, many lenders many be willing to negotiate a price below the full balance owed on the property.
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Close the deal. Draw up the purchasing agreement. According to the Front Door website, a title search is required to determine if other liens exist against the property. Also, an escrow company will need to handle the transfer of funds and property ownership. If you're inexperienced in these areas, ask your real estate agent for assistance. Make sure you fully understand your purchasing contract and that it contains all of the agreed-upon terms and conditions. This agreement will be a legally binding contract.
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References
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