How to Find and Screen Pre-Foreclosure Properties

Every pre-foreclosure begins with a public document. Which one you see first depends on how foreclosure works in the state:

• Notice of default. In many non-judicial states, the trustee records a notice of default at the county recorder's office, stating the amount past due and the time allowed to cure it.
• Lis pendens. In judicial states, the lender files a lawsuit and usually records a lis pendens, a notice that a case affecting the property is pending.
• Notice of sale. Later in the process, a notice of trustee sale or a court's sale notice sets the auction date. Some states skip the separate default notice and start here.

These documents are kept in a few places: the county recorder or clerk, the court's case records for judicial foreclosures and, in many states, legal notices published in a local newspaper or on a public notice website. Searching each source yourself costs little but takes time, and formats differ from county to county. For how these filings fit into the wider process, see what is a pre-foreclosure.

A listing service collects these filings across many counties and puts them in one searchable place. On RealtyTrac you can search pre-foreclosure listings by location and narrow the results by property type, filing type and filing date, then save the properties you want to follow.

A few habits make a list more useful:

• Stay local. Start with neighborhoods where you already know prices, rents and typical repair costs. You will screen faster and estimate value more accurately.
• Match your plan. If you want to live in the home, filter for sizes and property types that fit. If you invest, focus on property types your financing and exit plan support.
• Watch filing dates. A recent filing usually means more time before any sale. An older filing with no sale notice may have stalled, been resolved or be close to a sale.
• Expect attrition. Many owners reinstate, modify the loan or sell on their own, so most leads will drop off. Plan to screen many properties for each one you pursue.

Treat each listing as a pointer to a public record, not a final answer. Cases are dismissed, rescinded or rescheduled, and any database can lag behind the courthouse.

Before you spend time on a lead, confirm the basics from the source documents:

• Filing status. Pull the recorded notice or the court docket and check whether anything newer has been filed, such as a rescission, a dismissal, a notice of sale or a bankruptcy.
• Ownership. Read the current vesting deed and note every owner on title, since all of them generally need to sign a sale. An estate, a divorce or a trust adds steps.
• Foreclosing lender and trustee. Note who is foreclosing, which loan is in default and which trustee or attorney is handling the case. You will need these contacts to confirm sale dates later.
• Property details. Check the assessor's record for size, age, lot and property tax status.

Mistakes here cost more later, for example pursuing a home whose case was dismissed months ago or talking terms with only one of two owners.

Equity is the first filter, because it decides whether a sale can close at a price the owner controls or only as a short sale that needs lender approval. A quick estimate is enough at this stage:

1. Estimate market value from recent sales of similar nearby homes, the basis of a comparative market analysis.
2. Add up the recorded mortgages, home equity lines and other liens you can find in the public record.
3. Subtract the debts from the value to get a rough home equity figure.

Treat the result as a range, not a number. Recorded amounts show what was borrowed, not today's balance. The balance may be lower after years of payments, or higher once missed payments, interest, late fees and foreclosure costs are added. Unpaid property taxes, HOA dues and judgments may not show up in a quick search at all.

Many buyers sort leads into likely equity, borderline and likely underwater. For example, a home estimated at $300,000 with $120,000 in recorded loans is a likely equity lead, while the same home with $290,000 recorded is borderline at best once selling costs are counted. Confirming real payoff figures comes later, when you evaluate the deal.

Time is the second filter. Find out how far the case has progressed and whether a sale date has been set. In non-judicial states, a recorded notice of sale usually means the auction is weeks rather than months away. In judicial states, look on the court docket for a judgment or a scheduled sale.

Then compare the time left with how long your purchase would take. A cash purchase from an owner with equity might close within weeks if title is clean. A financed purchase needs time for an appraisal and underwriting, and a short sale can take months. If the sale date is too close for your kind of deal, set the lead aside or keep watching it, since sale dates are often postponed.

Confirm any sale date with the trustee, the court or the foreclosing lender's attorney rather than relying on a notice alone. Closing a pre-foreclosure before the foreclosure sale date explains how the remaining time shapes the rest of the deal.

Most pre-foreclosure homes are still occupied by the owner, which is part of what makes a negotiated sale possible. Some are vacant, and a home the owner has left can become a zombie property that deteriorates while the foreclosure drags on.

You can learn a lot without disturbing anyone:

• View the exterior from the street. Note the roof, windows and yard, and signs of vacancy such as piled-up mail or posted notices.
• Review past listing photos, permit history and the assessor's record for the home's age and any additions.
• Check whether the owner's mailing address on the tax record differs from the property address, which can suggest a rental or a vacant home.

Do not enter the property, look through windows, question neighbors about the owner's situation or leave notes on the door. If the home is a rental, remember that tenants may have rights under their leases and state or local law that carry over to a buyer.

A spreadsheet or saved searches with notes are enough. For each lead, record the filing type and date, the foreclosing lender and trustee, any sale date, your value and equity range, occupancy notes and the date you last checked the status.

Rank leads by the combination that matters to you: enough estimated equity, enough time before any sale, and a property type and location you understand. Recheck status regularly, because owners reinstate, cases are dismissed and sale dates move, and drop leads promptly once they resolve.

Keep your notes factual and limited to public information. You will refer back to them when you contact an owner, and a clear record of where each figure came from makes the later evaluation faster.

The leads that pass screening are candidates for an honest first contact with the owner and, if the owner is interested, a full evaluation of the numbers.