Let me guess, you are planning to buy a house and you came across a lot of options, one of them being pre-foreclosure. This term is not used as much as foreclosure and usually, its meaning is not so clear. If you are looking for a definition, then stay until the end because I am going to explain everything about pre-foreclosure homes.
Pre-foreclosure vs. Foreclosure
To keep it simple, foreclosure homes belong to the banks because the previous owner could not pay the bills on time. So, the bank takes the home away and puts it up for auction. There is a general misbelief that banks want to get rid of the house as soon as possible, thus willing to sell it at a lower price. I am here to tell you that it is not true. Okay, we went off the rails, back to our topic. Now, before the home is put up for an auction, there is one more stage that usually goes in disguise - pre-foreclosure. If the owner is 90 or more days behind the payments, the property appears in the pre-foreclosure stage, which means the owner can either pay the bills or sell the house.
Buying a Pre-foreclosure Property
“The owners are desperate to pay their bills, they must be selling the house cheap at twice the price.” To be fair, it does sound logical but do not jump to conclusions. While buying a pre-foreclosure property does have benefits, that are some nuances that you need to be aware of. First of all, it is not so easy to find a pre-foreclosure house. Why? Because the owner can choose not to put it on sale, so there are no signs or public announcements. Some of the methods of finding pre-foreclosure property include search on special websites, checking the newspapers for foreclosure notices or even letting people around you know that you are ready to buy a house with cash. Once you found a house, don’t just knock on the door and say “I came to buy your house.” Again, keep in mind that these people are losing their property and psychologically speaking, they aren’t in a great place. Try sending a letter or an email first, then if they agree to meet you, make your offer. Another important factor about buying a pre-foreclosure property: it might take longer since you need the lender’s approval, before it legally becomes yours.
The Benefits of Pre-foreclosure Homes
From the buyer’s perspective, the number one benefit is the price: pre-foreclosure homes tend to have lower prices in the market. Furthermore, unlike foreclosure homes, you are allowed to inspect the house before you make the purchase. Great, isn’t it? Here is another advantage to consider - the potential of the house. You can fix some minor things you didn’t like about the house and sell it at a higher price. As a matter of fact, pre-foreclosure is a win-win for everyone: the seller gets rid of the debt and the lender acquires a steady payer.
This is pretty much all you need to know about pre-foreclosure. Hunt, receive a permission to see the house, make an offer and become the new owner. Pre-foreclosure is not another buzzword that scares people off. It is a good opportunity to seize, only if you knew how.