The Big Advantage of Buying a Home Pre-foreclosure
Everybody talks about how buying a home pre-foreclosure as multiple advantages of large discounts on the marketplace up to 50%, a lower down payment, more time to inspect the house and so on. It is true that buying a home pre-foreclosure can often be advantageous but, as with any form of investment, you need to be familiar with the risk reward trade-off. In other words you also need to know about the downside so that you can take a balanced and objective decision on the merits of each separate case.
You will first have to decide whether any form of foreclosed property whether pre-foreclosure or auction or REO is suitable for you. For instance if you have drive home owning experience, you'll would be better placed to handle the complexities of buying a foreclosed property. Similarly, access to expert advice or financial resources and some coping with unforeseen problems and expenses that would almost certainly arise. Ultimately it is your decision whether or not to buy a foreclosed property and at what stage of foreclosure.
Pre-foreclosure refers to the period after the homeowner has gone into default on his mortgage payments (typically when the payment is more than 90 days overdue) and the lender has finally a public Notice of Default. These notices can be found in your local newspaper, the local public records office or websites that specialize in tracking these notices.
Pros:
-the default notice will normally give the borrower plenty of time (often several months) to become current on his repayments. This gives plenty of time to carry out a meticulous and detailed inspection, perform a comprehensive Comparative market analysis and research the public records and the title in detail
-you were generally find the homeowner at his most corporative because at this stage he still believes he may be able to salvage something out of his home equity. He will be willing to talk to you if he believes there is something on the table for him.
-if you are fortunate, you may find yourself in a situation where there is not much bidding competition which enhances your chances of getting a good price.
Cons:
- If the owner has been unable to meet his mortgage payments, it is extremely likely that he has not had the money to spend on essential maintenance and repairs. Buying his house may turn out to be more expensive than you had thought because of the necessity of bringing the house up to scratch.
-the owner's precarious financial position may have also resulted in judgments against him on loans such as second mortgages or home improvement. These may well include costly penalties and fees which you would have to sort the out before getting clear title.
You will need to do a lot of hard work in order to find yourself a good deal. Always attempt to establish one on one contact with the homeowner who will need to feel comfortable dealing and negotiating with you. After all, the entire process involves his precious home and he might feel better inclined to deal with you if he thinks you are a person who would give him a fair deal and look after his home.
