Pre-forclosure help

11 Replies

I have a stepsister that I just found out is getting ready to loose her house to forclosure in May. I am not sure as to exact numbers yet but am thinking of birddogging this property to investors but have no dealings with what a good pre-forclosure is. I would personally feel that most people in forclosure have little to no equity in the home otherwise they could most likley refinance?(Am I right?) If this is true than how does purchasing a pre-forclosure property profit the investor, when most people in forclosure owe more than the house is worth.

Depending on the existing LTV, your sister in law could opt for a foreclosure bailout, but she would need between 30-35% equity in the property to qualify.

Has she tried to speak to the original bank about a payment recovery plan? It might be a excercise in futility, but if she was sucessful, it would be the cheaper alternative (as opposed to the higher rates a FC bailout loan offers and the added expense of closing costs).


Scott Miller

Well unfortunatly she is in the middle of a messy divorce, and can not afford the property on her own, and neither can he. So what I am going to do if it is possible is speak to her about letting an investor come in and take it over to avoid having a forclosure on her credit report which is a credit killer + I know how banks like to sell the property back to themselves at a loss, give the owner a debt forgiveness for the loss they take, which they now have to pay taxes on, and then the bank list the house with a realtor and tries to get fair market for it. Unfortunatly I am speaking from experience. My father who is a realtor tried listing the house for her but the Detroit area is extermely slow right now and the numbers he gave me didn't sound bad. Plus if the house were updated someone could make a good profit from this. Of coarse I have to verify the numbers and her willingness to do this.

THe investor could potentially profit if they were able to succesfully do a short sell on one or all of the loans and liens to get the property within a criteria where they can then rehab and sell and make money. That is how people are making money when there is no equity.


I am a newbie as well, acutally in the middle of my first short sell. I'll give you the example I am working one. The property will foreclose and be auctioned if nothing is done on April 14th. There are two mortgages -1st 62,000 2nd 23,000, 5 liens (two hospital-1,000, child support-6,200, property tax-dont have exact number yet, and city sewer-100). The ARV(after repair value) of the property is 130-140k. THe "as-is" value is much less, needs abt 10k in repairs and the mkt here is soft with houses avg on the mkt 60 plus days when lited at full mkt value. There are a number of ways to buy the property, but I am trying to short the liens, (have to pay back tax liens so not them) and the mortgages. In order ot do a short sell on the mortgage you have to have the homeowner give you written authorization to speak to the lenders. Get a standard form for that. Once you do that you can get teh payoff on the loans and reinstatement amounts so you know what you are dealing with. THen you can ask the lender for a short sell package, put it together and try to convince the lenders that the house is worth much less than what the loans are for, and if they foreclose the 2nd will likly not get anything and the first will be shorted. NOw this is the simplified version, VERY simplified, bc there are a lot of thing to do and ways to go about it. There is a short sale sub-forum in here you can look thru or buy a book like, "How to make big money in foreclosures without cash or credit" it will go thru everything with you. Once you start to see it work it becomes much clearer. It is relaly about getting the bank what they want, getting you what you want, and getting the homeowner what they want. If you can satify all three then you most likely have a deal. Good luck.


Thanks, Ctoilman that helped a lot, and I can see I have a lot to learn. I am going to be attending an area REI club meeting this Tuesday and hope that maybe I can get set up with a mentor who can make this whole process a lot clearer for me.

Well honestly, there is a lot of valuable information on here. I also go to and reward their forums. I bought the book i listed above and a few others now and really learned a LOT. After going thru the motions when starting out I actually began to get calls from desperate homeowners who wanted to actually GIVE me their houses! It was unbelieveable, just as i read. Just as my friends and family told me wud never happen, they couldn't understand why anyone would ever do it! You'll figure it out. If it is a specific question I can try to help you out, or I am sure there are a LOT of well versed people on this board who have great advise. BTW, where are u from?

I'm from a Allen Park, Mi. which is about 15mi. south of Detroit home of the $3000 dollar home. It amazes me how many home are in forclosure in this area, the auto industry has been hit hard and unfortunatly all our eggs have been in one basket, but I BELIEVE it is going to turn around and when it does I want to be established with at least a few choice properties in my back pocket so I can partake in the upswing. :D

It is amazing you could quite possibly but entire city blocks for a song, most of the blocks would be vacant lots with a few run down houses that should be bull dozed. But if you buy in the right area the property itself could be worth a lot of money if a private developer were interested in it. But of coarse that is the catch. Detroit can't stay poop palace forever? Can it?