Buying Pre-Foreclosures by:
Marc Rasmussen
These methods work in Florida because we have
mortgages, however I am not sure of the process for states that use deeds of
trust. Much of this information will apply to Florida and its laws so it is
best to get the overall gist and apply it to your area.
I have purchased several properties over the last 6 years in the Sarasota,
Florida area by finding pre-foreclosures. Pre- foreclosures are simply homes
that have gone into foreclosure but have not sold at the auction yet.
I started out with pre-foreclosures because I did not have the money to
purchase homes at the county auctions. Typically the auctions require you to
pay cash at the day of the auction.
Step 1 - Find the website for your county that contains courthouse
information. Many counties now have their court information online, however
smaller areas may not be that advanced yet. You are basically trying to find
information on lawsuits.
Step 2 - You will want to look for people who are being sued by their
mortgage lender. In my area the very first step to a foreclosure is the
"Lis Pendens". Latin for "a suit pending," a written
notice that a lawsuit has been filed which concerns the title to real
property or some interest in that real property.
When a homeowner stops paying their mortgage the time it takes for a bank to
start foreclosure proceedings varies. However, I have noticed it is around
4-6 months. I guess the banks figure at that time the homeowners are in too
deep and will not be able to pull themselves out.
Every counties computer query system is going to be different so this is
where you will need to do some investigating. Typically, you will see the
large banks or lenders vs. Joe Schmoe. This is the first step in the
foreclosure process. These people are going into foreclosure.
Step 3 - Once you have found the "Lis Pendens" create a list of
people who are in foreclosure. Take this list and cross reference them with
county property records. Get to know your local real estate market. I am
Realtor here in Sarasota so I know the real estate market well. There will
be houses you may not want to buy so there is no point in chasing them. You
also need to know the real estate market to find out if what you are buying
is a deal. There is no point in going through these steps if you are just
going to buy a house for retail. The point is to buy the house undervalued.
You need to know the real estate market to determine what is a good deal and
what is not.
Step 4 - Contact these people - find a way to contact them that most suits
your personality. You can call them on the telephone, knock on their door or
write them a letter. I took the less aggressive approach and wrote letters.
Sometimes these people do not want phone calls or to be contacted in person
because they may have already been getting harrassing phone calls from banks
and bill collectors.
Step 5 - Try to buy the house. Be sympathetic to their situation and try to
find a win-win scenario for you and the homeowner. Obviously, you are trying
to buy the house at an attractive price to you. This price will depend on
what you plan to do with the property. If you plan to live there then you
don't need too much of a discount. If you plan to flip it then you need a
larger discount.
Here are a couple of things to remember about buying homes in foreclosure:
Banks will take less than what is owed to them. If you find a house with a
large mortgage in relation to it's value you may need the bank to take a
discount on their mortgage. I have done this with clients when selling their
home. However, banks are not dumb and they know the values of real estate
have been going up the last few years so it may be difficult.
Here in Florida the foreclosure process from start to finish usually takes 3
to 6 months.
You can pull someone out of foreclosure up until the actual foreclosure sale
and in some instances even after the sale.
Legitimate lenders do not want to foreclose and take back homes.
In most situations you will be dealing with the foreclosing attorney not the
actual bank filing the foreclosure suit.
This information will start you off to finding pre-foreclosures to
buy. Within the last few months the market has slowed down. As a
Realtor, I have seen many people stretch themselves to get into a house they
really can't afford. Flexible lending policies have lead to more
foreclosures. Good luck.
About the Author
Marc Rasmussen is a Sarasota, Florida Realtor and real estate investor. For
more information go to TheSarasotaMLS.com
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