Nobody wants to have a foreclosure on their credit record. This will hurt them for a long time to come, especially if their credit record is reasonably okay otherwise. For this reason, many people facing a foreclosure are more than willing to allow someone to purchase their home at an extreme discount to avoid those proceedings. This called buying a pre-foreclosure.
Pre-foreclosures are a sticky situation sometimes. It is very hard for the person that is losing their home, and all the equity they have in it. The situation is not the most cordial from a buyer’s perspective. Still, the purchase of pre-foreclosures is a good thing for both parties. The buyer is getting a property at an extreme discount, and the seller is getting out from under a potential bankruptcy. How in the world does one go about inquiring about such a situation?
The first thing you should know is that just walking up to the front door is not a good idea. Not every person will be quick to see the advantage of a pre-foreclosure sale. Also, it is not a very tasteful thing to do in general. If you are aware of a property that is close to foreclosure, and you are interested in the property, then maybe you could inquire from a distance. If you can call the homeowner, then this is a much better option. The fact they are talking on the phone will help to quell any feelings of shame and will help them to be more open to your suggestion. Another effective way is to send a letter. That way, they can contact you if they are interested in your pre-foreclosure offer.
Once you have someone interested in your offer, then you need to look closely at the situation and the numbers. You need to consider all expenses you will incur in the transaction, and base your offer off of that final number. Do not make an offer until you are certain of the costs. This means speaking with the lender and finding out the whole situation.
Pre-foreclosures will never be a purchase that will be fun for the seller. They are losing a great deal of time and effort in most cases, and often they are losing a home that means a great deal to them. Still, you should feel good about the long term benefits you provided for the seller in the long run. It often is the best solution for the seller, whether they see this or not at the time of purchase.
When you are negotiating or finalizing a pre-foreclosure, do not attempt to show those benefits to the homeowner. That is not the time to do this, as it is already difficult enough for the seller. Pre-foreclosure purchases should be done in a business like fashion, and be handled professionally and quickly. Make sure that the seller understands all of the terms clearly, and take the time to answer any questions they may have.
Buying a pre-foreclosure is a positive opportunity, but you need to be thoughtful of the plight the seller is in. Try to be understanding, and extend courtesy to them in any way that you can. Still, you should remember that it is a business move, and keep your own interests in mind as well.
Good advice. I’m sure someone in this position will find it helpful.
Comment by Rich — June 25, 2009 @ 5:19 pm