Pre-foreclosure properties

8 Replies

At the risk of pointing out how naive I am on this subject.....is it possible(ethical) to purchase homes after the foreclosure process begins? Can you contact seller and attempt to bring loan current in exchange for the deed? I've seen this option to view pre foreclosure homes on sites like zillow and wondered if this is something people do?

Yes, it is a bit more involved than just speaking with the seller. In short, if you get the seller and the bank to agree, you could have something. 

Many investors make a good living on such "deals" in the pre foreclosure.  Start by learning the process of foreclosure for your state.  In the state of Texas, all foreclosure notices have to be posted at the county courthouse prior to 21 days of the first Tuesday of every month.  At minimum that gives you 21 days to find the deal, secure it and stop the foreclosure from hitting the steps of the courthouse.  No small feat at times but it can indeed be fruitful.  

There is a lot of money in foreclosures, this is the only business for some Investors.  Most local governments have a office for foreclosures.  For example in East Baton Rouge, Louisiana,  it is the Sheriff's Department who handles foreclosures.  There is a list free to the public, you don't need Zillow, their list are often outdated any way.  Try to offer the Home Owner "Cash for Keys", and use a Sale subject to the outstanding Mortgage if it is not to high to profit on the deal

@Kristen Martin , first of all, welcome to the BP family. I took a quick look at your profile and I'd say you're well on your way to exceeding your goals. 

Second, allow me to ask a couple questions without the intent of discouraging you. I'm only interested in where you are in the analysis. 

If you brought the owner current on a short, how would you expect to profit? Are you looking to rehab and flip? That can be tough with a property under water. If you have in mind to partner with the owner for cashflow, where is he going to live in the meantime? Further, have you figured your ROI target? Would it be worth it to put cash up front for a piece of the passive income?

Third, where are you interested in investing? Are you only interested in passive income or are you considering flipping some for the capital to hold others and build your portfolio? What is you plan for financing this mission?

So many questions for a pretty simple question, but that's the business. Never be ashamed of not having all the answers. Nobody does. There's a lot to keep in mind. That's what BP is here for. If you're serious, I'm happy to help. I hope this gets you thinking about some of the issues. If you answer my questions, I'll answer yours. You won't be naive on this topic for much longer. I'd like to see you succeed.

All the best.

And...this is exactly why I love this site. Not just timely, but wise and encouraging response! Thank you gentlemen! First off, @Alex Hamilton, I appreciate the tip. I have noticed that zillow's information does lag significantly behind MLS. I'll do my research on where and when to find local foreclosure info from the primary source.

And @Tom Mole , hugely helpful! So, this is what led me to my initial question...I've been scouring the local real estate market(stanislaus county) , looking for either a multi family unit in an area safe enough for my family to live in a portion of and that the #s make sense on, or a well/priced SFR that needs a reasonable bit of work that we would live in for 2 years and either sell or rent when that time came. In my quest for such property, I stumbled upon that filter on zillow and realized that there were several(not many) homes whose market value exceeded the amount owed on the loan and the amount of $ needed to bring them current is available to me without the sale of my current residence

Originally posted by @Kristen Martin :

At the risk of pointing out how naive I am on this subject.....is it possible(ethical) to purchase homes after the foreclosure process begins? Can you contact seller and attempt to bring loan current in exchange for the deed? I've seen this option to view pre foreclosure homes on sites like zillow and wondered if this is something people do?

 Kristen, the only "naive" question is the one not asked.  You need to checked out how foreclosures are handled in your area but, the Bank wants money, not the house.  When a owner brings a house current that is in foreclosure, they can sell the house.  You loaned them the money to bring the house current.  Being only an investor and not the mortgage company, you need a way to get your money back plus, a fee for your time and effort.  An example is a house valued at $100,000.  Lets say it takes $50,000 to bring it current with the back payments, court cost and Attorney fees.  You get an agreement to Deed the house to you for $60,000 subject to any outstanding mortgage, if you are not paid that $60,000 in 6 months or so, the house is yours.   If they pay, you made $10,000.  Obviously, you can not do tjhis  with a house that is upside down.  The more the equity the more your pay check is.  If the Laws in in your State will not allow this, dot it were the Law allows.

Originally posted by @Tom Mole :

@Kristen Martin , first of all, welcome to the BP family. I took a quick look at your profile and I'd say you're well on your way to exceeding your goals. 

Second, allow me to ask a couple questions without the intent of discouraging you. I'm only interested in where you are in the analysis. 

If you brought the owner current on a short, how would you expect to profit? Are you looking to rehab and flip? That can be tough with a property under water. If you have in mind to partner with the owner for cashflow, where is he going to live in the meantime? Further, have you figured your ROI target? Would it be worth it to put cash up front for a piece of the passive income?

Third, where are you interested in investing? Are you only interested in passive income or are you considering flipping some for the capital to hold others and build your portfolio? What is you plan for financing this mission?

So many questions for a pretty simple question, but that's the business. Never be ashamed of not having all the answers. Nobody does. There's a lot to keep in mind. That's what BP is here for. If you're serious, I'm happy to help. I hope this gets you thinking about some of the issues. If you answer my questions, I'll answer yours. You won't be naive on this topic for much longer. I'd like to see you succeed.

All the best.

 Tom, are you interested in holding property for passive income or flipping for cash? Now to answer your questions.  First of all, investors I know, to include myself, have a line of credit to work from, which was created by previous flips and/or rental income they have.  These investors hold property for Passive Income or rehab and flip, depending on where the property is, and the amount they have invested in the property.

Second, experienced investors let the Bank have property that is under water, if they can't get a reasonable bid in at a foreclosure sale.  Investors give owners of property that has equity in it;   cash to relocate, and get signed agreements from owners,  to deed the property they have invested in plus, rights to buy the property back at the amount invested plus interest on the money invested.

After investing in a short, your ROI is the difference any ARV, and amount of investment or annual rental income if holding the investment. If the owner buys the pending foreclosure back your profit is the interest on your money invested in the short.

Most investors have more deals than they have the money or time to close on, and would welcome help.

Hi Jason,

Thanks for the information regarding the timeline for pre- foreclosure. 

This is very crucial in the process.

Francis M

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here