The foreclosure process allows for three different bargain-buying opportunities: when the property is in the pre-foreclosure period, typically a short sale; at the public foreclosure auction; or when the property is bank owned, also known as REO.
Here’s a quick checklist to follow if you are interested in purchasing a pre-foreclosure (NOD, LIS) property. In the 2012 market, these properties are typically short sales because the homeowners owe more the property is worth.
In separate articles we also cover how to buy at the foreclosure auction and how to buy bank owned homes.
1. Prepare your resources
Make sure that you have the resources in place to purchase this property. Secure pre-qualification for a loan if you haven’t already and enlist the help of a buyer’s agent if you’re not comfortable contacting the owner or listing agent and navigating the negotiations and closing process on your own.
2. Confirm property status
Call the trustee or attorney listed in the Contact Information section of the property details page on RealtyTrac to confirm that this property is still in pre-foreclosure. Owners in default can stop pre-foreclosure by paying off the amount owed (called reinstatement) or by selling the property. If you are a RealtyTrac member, you can also sign up for Property Watch email alerts from the property details page to be alerted immediately by email if the foreclosure status, auction status or market status of the property changes.
3. Evaluate bargain/investment potential
Determine if this property represents a good bargain or investment opportunity. If the property is listed for sale, a good place to start is to compare the List Price to the property’s Estimated Market Value. If the list price is lower than the market value, the property could represent a bargain purchase. If the property is not listed for sale, you’ll want to look at the Sales Trends section on the RealtyTrac Stats & Trends page to see the average foreclosure discount that foreclosure buyers are getting in the surrounding zip code. That will give you an idea of the type of discount to reasonably expect on this property.
4. Contact the owner or listing agent
If the property is listed for sale on the MLS, you or your buyer’s agent can simply contact the listing agent. If the property is not listed, you or your buyer’s agent will need to contact the owner in default to express your interest in the property. Check under Contact Information on this report to find contact information for the listing agent and owner. RealtyTrac members can mail customized postcards to distressed homeowners via a dynamic online interface.
5. Negotiate a purchase agreement and close the deal
If this owner is interested in selling during pre-foreclosure (which is beneficial to the owner’s credit and allows the owner to walk away with something to show for any equity), then you’ll need to negotiate the terms of the purchase, enter escrow and close the deal before the property is scheduled for public foreclosure auction.
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5 Steps to Buying at Foreclosure Auction
4 Steps to Buying a Bank-Owned Home