Pre market foreclosure

7 Replies

I'm curious if a home is "pre foreclosure" does that mean someone still lives in that house? If so could you contact them and make an offer to maybe help them walk away with something and you get a good deal at the same time? I'm not sure how this works. Thank you pros for being patient with this newb lol

What you are probably seeing is that the lis pendens (aka foreclosure notice) has been filed. The foreclosure process has been started, but that can take months to work its way through the system. If you took the client's name and went to the official records website from your county, you would likely see the lender has filed lis pendens. 

That being said, your original questions: yes, most likely still live there and aren't paying their mortgage anymore. And of course you could contact them, it will depend on how much they owe vs how much the property is worth. You tend to think if the house is worth more than they owe they would just sell and pay off the bank, but you never know. It could be hardship, loss of job, death, etc. 

You might want to look at some comps and get an idea of what you think the property could be worth, and then you can reach out to the owner. You will need to figure out what they owe so you know what you are working with. And of course the condition of the property comes into account as well. It could be a wholesale deal, something you buy and rehab, something you do a subject to (essentially paying them to take on their existing mortgage terms if you think you can rent for more than their PITI payment is), or other structures.

Long story short yes you can contact them and see what their intentions/needs are. 

Hope that helps. 

I have a similar question: I reached out to a homeowner who is in the pre-foreclosure stage and he is very willing to sell me the property (of course) because he owes more than it is worth. What should my next step be? Do I contact the bank and try to work directly with them? Or, do I suggest to the homeowner that he find a realtor so that we can work out a short sale?

Thank you for any and all responses!

Originally posted by @Stephen Kiser :

I'm curious if a home is "pre foreclosure" does that mean someone still lives in that house? If so could you contact them and make an offer to maybe help them walk away with something and you get a good deal at the same time? I'm not sure how this works. Thank you pros for being patient with this newb lol

In NC, pre-foreclosure means the owner is in default, a court action has been filed, and the process (foreclosure process, power-of-sale by state law) has not completed. You should be aware of the NC Foreclosure Rescue statute in the event you are thinking of "helping". For the most part, you can conduct offers to purchase just like any other property.

Originally posted by @Sandra Holt :

I have a similar question: I reached out to a homeowner who is in the pre-foreclosure stage and he is very willing to sell me the property (of course) because he owes more than it is worth. What should my next step be? Do I contact the bank and try to work directly with them? Or, do I suggest to the homeowner that he find a realtor so that we can work out a short sale?

Thank you for any and all responses!

 Why would you want to buy a house that is worth less then what is owed?  I would keep looking.  Short sales are a huge pain and can take forever.  

Originally posted by @Stephen Kiser :

I'm curious if a home is "pre foreclosure" does that mean someone still lives in that house? If so could you contact them and make an offer to maybe help them walk away with something and you get a good deal at the same time? I'm not sure how this works. Thank you pros for being patient with this newb lol

 I do a ton of marketing in Columbus, Ohio, and my experience has been that the overwhelming majority of people who call in pre-foreclosure have waited entirely too long.

You have to remember that usually they have to be 90 days late for the pre-foreclosure to even get recorded, and at that time they are already 3 months behind on mortgage payments, taxes and have probably accrued late fees and fines.

I have had so many people call me who could have listed their property retail a year ago but never did, and now they have racked up $20k in back payments and fees that they are underwater.  It's a shame when people don't try to help themselves until they are issued an auction date.

I'm *very* late to this thread but wanted to add a few words from my experience. Back in the days before online records, I knew a couple young, eager investors who used courthouse research and the preforeclosure method to launch  successful real estate careers. (I edited a book they wrote, but that never really got published. They tried, unsuccessfully, to attract paying students.)

Their model was to offer the homeowner some "walking away" money and in some cases they even ended up renting the properties back to the homeowner. The benefit to the homeowner is, they avoid foreclosure and possibly bankruptcy.

If they found a really great deal, they would do a same-day "double close" to another investor. I guess now they call that wholesaling. Most often they were buying at 40 cents or less on the dollar, and doing a quick fix-n-flip.

They were the first folks I ever heard say, "You make your money at the closing table."

Other than the legalities of the wholesaling technique (which vary by state) I don't see why the preforeclosure method wouldn't be a very viable method. My guys would simply knock on the door and start a conversation. All depends on your comfort level.

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