Making an Offer on Pre-foreclosure

3 Replies

Hello all,

I've found a property that's in pre-foreclosure in NJ. I'm wondering how financing on these works.

Could I get a conventional mortgage if the house is in livable condition? What do I need to get from the current owner who is to-be kicked out? Just an agreement of sale at a certain price point?

It's a pre-foreclosure @ $170k, but after reading Long Distance Real Estate Investing by D. Greene, he speaks of offering the owner a little extra above the outstanding loan amount.

Any and all insight is very helpful.

The outstanding loan amount should not be a factor in this equation. It's irrelevant. A decent guideline would be 70% of the ARV minus repair costs.

@ $170k - does this mean it's listed for $170k? If that's the case you will need a contract with the seller for $170k. 

Originally posted by @Alejandro Tirso :

Hello all,

I’ve found a property that’s in pre-foreclosure in NJ. I’m wondering how financing on these works.

Could I get a conventional mortgage if the house is in livable condition? What do I need to get from the current owner who is to-be kicked out? Just an agreement of sale at a certain price point?

It’s a pre-foreclosure @ $170k, but after reading Long Distance Real Estate Investing by D. Greene, he speaks of offering the owner a little extra above the outstanding loan amount.

Any and all insight is very helpful.

Quick answers to your questions: yes and yes but see below questions.

Is there equity in the property? In other words, is it worth more than the $170k plus closing costs? If so, it's no different than other real estate transactions. You get a purchase agreement, go to escrow, payoff the loan, and take title to the property.

If the property is underwater, you will need the lender to agree to a short sale.

Before all this, is the property listed for sale? The house belongs to the owner of record. The lender does not own the property until a foreclosure has taken place. Before the foreclosure, you have to enter into an agreement with the owner if you want to buy the property. If the owner hasn't listed the property, they might have other ideas on what to do with the it (Like live in it for as long as possible while paying the minimum amount necessary to do so). Without the owner's cooperation, you have no chance to buy the property until title transfers after the foreclosure sale.