2.8 min read
Are you interested in negotiating an excellent deal on a property by buying a pre-foreclosure? It is an excellent real estate tactic for acquiring properties at a lower than market price - with the proper planning.
What is a Pre-Foreclosure?
A pre-foreclosure is a property in the first stage of the repossession process. Essentially, this is a home that is far enough behind on mortgage payments that the lienholder (bank) has decided it is time to cut their losses. At this time, the bank files a Notice of Default to repossess and sell the home at auction.
When a homeowner receives a Notice of Default, the only way to avoid foreclosure is to pay the amount they owe the bank in full within a minimal time. Unfortunately, this gives them only two options: they either come up with the money. Another way is to keep possession of their home or sell the house to pay back the bank. Thereby losing their home but potentially walking away with some cash.
Locating Pre-Foreclosure Homes
The first step in negotiating a pre-foreclosure is, of course, locating a pre-foreclosure home.
There are many ways to find pre-foreclosure homes. A few of the most reliable methods are working directly with a realtor, browsing real estate websites, and checking newspaper listings. Additionally, you can contact local financial institutions to inquire about these properties or even check public records for notice of default.
Evaluate the Property
You must evaluate the property you are interested in before going further into the planning process. A pre-foreclosure may be listed at a low price, but that doesn’t always make it a good investment.
Important factors that can impact the value of a home are local crime rates, proximity to parks and schools, average family income in the area, and more. You should see the house personally if these things justify the home price. Major structural issues like a bad roof or foundation can be costly and potentially eliminate your chances of making a profit.
Make Your Initial Offer and Negotiate
Once you find a home that your research has proven is well worth the price, it’s time to develop an initial offer. While you should always offer below their sale price, it should still be within a range that they will at least entertain your offer.
Keep in mind that this is already a motivated seller. Your goal is to offer a fair price, considering the circumstances. They may come up with a counteroffer. If you have researched, you can determine whether it is financially feasible to accept.
Seal the Deal
Once you have agreed on a price, it’s time to purchase. It would help if you never assumed that you owned the home until the sale agreement was in your hands.
As you see, negotiating on a pre-foreclosure is relatively simple and, with adequate research, can be an excellent way to acquire properties at a great price!