Pre-foreclosure is the first stage in the foreclosure process. It begins when a Notice of Default (non-judicial states) or Lis Pendens (judicial states) has been filed against the homeowner due to missed mortgage payments. During the pre-foreclosure phase, the homeowner still owns the home and may be working to cure the default. It is during this period that you as an investor will need to work with the homeowner to purchase the property.
Here are steps you can take to find and purchase pre-foreclosure homes.
1. Find pre-foreclosure properties
Develop a system to keep track of properties that interest you.
2. Confirm Pre-foreclosure Status
When a property enters pre-foreclosure, the owner usually has at least 2-3 months to reinstate the property.
3. Check potential bargain
Find out as much as you can about the estimated market value of the property.
4. Contact the Owner in Default
You or your real estate agent should contact with the owner to express interest in the property.
5. Negotiate a Purchase Agreement
If you and the owner both agree to proceed, you need to negotiate the terms of a purchase.
6. Close the Deal
Make closing the deal contingent on a full title search conducted by a title company or attorney.