Pre foreclosure leads are properties in the beginning stages of the foreclosure process. The borrower has defaulted on their mortgage payments, but still has the chance to either keep the property, sell it, or conduct a short sale.
A distressed homeowner willing to sell the home during the pre-foreclosure process just wants out from under their mortgage payment — to avoid foreclosure and to move on with his or her life. Houses sold during this time period go for what the homeowner owes on the loan, as opposed to current market value of the property.
The challenge for the buyer lies in locating these properties. Pre-foreclosure buying opportunities aren’t “listed” in the traditional manner, such as in the Multiple Listing Service (MLS). To find these homes requires a search, and there are several places to look. You can often spot pre-foreclosure listings through online directories, realtors, public records, local newspapers, attorneys, and through real estate wholesalers.
Here are a few things to know before buying a pre-foreclosure.
1. Use a Trusted Realtor
Realtors can help investors find pre foreclosure leads. They have access to the Multiple Listing Service (MLS), which is a local database of properties for sale accessible only to real estate professionals. Realtors will have the ability to narrow down the MLS search to identify only pre-foreclosure listings for you.
By using a realtor, you are enlisting the services of a professional who will do most of the legwork for you. A trusted realtor will narrow down prospective pre-foreclosure listings, schedule appointments and negotiate offers on your behalf. They will provide detailed property information and photos, including how much the property last sold for, the square footage and the yearly taxes.
Working with a realtor is ideal for a first-time home buyers or investors. They will guide you through the entire process, from finding the pre-foreclosure listing to purchasing it. You won’t have to worry about negotiating or paperwork. Realtors can also help a seasoned real estate investor; they will have access to more information than is available to the public. Realtors can help any investor short on time, or who may buy a property outside of the area they live in.
2. Using Public Records To Find Pre-Foreclosures
You can find pre-foreclosure listings for free in the public records section at your county recorder’s office. Just be sure to search for Notice of Default, Lis Pendens, and Notice of Sale to find quality leads. These notices are issued to the homeowner and are publicly recorded during the foreclosure process.
Public records include the property address and the homeowner’s name. They also generally include the bank’s name that is doing the foreclosing, and how much is owed on the property. They will not, however, include what other liens are owned on the house; you will need to get a title search for this information. Public records don’t provide photos or a detailed property description either.
Searching through public records for pre-foreclosure leads is ideal for savvy investors and home buyers alike that have the time, energy and know-how to put into locating a pre-foreclosure property. Since the information in public records is limited, it will require a lot of research and driving around looking at properties and making appointments with homeowners. It is best to consult with a local, trusted real estate agent that will know what to look for in a property and what to ask the homeowner.
3. Check Other Online Listings In The Area
There are several sites that advertise pre-foreclosed homes. Make sure you check the list option to make sure the homes you are interested in are still in the pre-foreclosure process. You may also want to drive by the property you are looking into, get to know the neighborhood, and possibly even talk to the homeowners about the property.
4. The Perks Of Pre-Foreclosures
There are many upsides to buying a pre-foreclosed home. Pre-foreclosures offer the buyer less competition and lower prices than when purchasing at an auction or a short sale. When you purchase a home at an auction, you don’t know its condition and haven’t viewed the interior. When a house is purchased during the pre-foreclosure period, you have the opportunity to view it and perform inspections.
And dealing with a homeowner is always easier than dealing with a homeowner and a lender. Buying a pre-foreclosure also does away with the need to pay a large sum of money upfront or pay cash for the purchase.
Many factors will figure into your offer, including regional real estate appreciation, and the potential for increasing value. Your offer should be considerably lower, perhaps 20% or more than your breakeven number. And be creative. For instance, an owner may be more willing to flex on price if you allow them to stay in the property for 30 to 45 days while they find a new place to live.
6. Making An Offer
To submit an offer, you could write a letter to the owner. This provides more sensitivity and is less confrontational. Remember that there is a reason they are in pre-foreclosure; try to be sensitive to that.
Keep in mind that if the property is managed by property management, you still must submit an offer directly to the homeowner. You could make an oral offer on the house if you prefer, but you’ll also want to get it in writing. That way, they can sign it if they want to proceed with the sale.
When you’re ready to search for pre-foreclosure leads, a Clever Partner Agent will know the local market well, and can help you find quality homes to scope out for a bargain. Once you’ve settled on a top choice, they can assist you with writing up a competitive offer to give you the best chance of having your offer accepted. Contact Clever today to get started.