I’m sure you know what a prior foreclosure is. But did you know that buying a home before foreclosure can save you up to 40% of the home’s pre-foreclosure market value? Or are you already thinking about buying a property before foreclosure? Either way, you’ll need information to learn more about pre-foreclosure and decide on your pre-foreclosure buying strategy.
For your information, prior foreclosure occurs when the homeowner has missed at least one loan payment. The lender will then issue a Notice of Default, which is a public record requiring the homeowner to respond to the unpaid loan/payment. This is the first legal stage of home foreclosure. Homeowners have to respond quickly to show their motivation to resolve the issue. Foreclosed homeowners will be highly motivated to look for homebuyers to purchase their home during this same period.
There are always pros and cons to buying before foreclosure. One has to get the balance point within the advantages and disadvantages. Buying before foreclosure could be very prosperous in return, but on the other hand, it could be a nightmare.
Speaking of its advantages, advance purchase purchase agreements can be flexible and adjustable. Because the deal only involves 2 parties: the buyers (us) and the home owner. Therefore, as long as the pre-foreclosure homeowner agrees, the deal is always negotiable. Second, buying before foreclosure could save you up to 40% of the market value of the foreclosed home. It means that if the market value of a home in foreclosure is $250,000, you could save up to $100,000. Surely your neighbors will envy you for having the same house as them but with the different price they are paying.
Third, buying pre-foreclosure directly from the homeowner versus buying a foreclosed home by auction or REO (real estate ownership) allows you adequate time to research the condition of the real estate in foreclosure. As stated above, the deal involves only you and the homeowner, you can always take a look at the title and other foreclosure details as long as the homeowner gives the green light, right? In most cases, buying before foreclosure requires a lower down payment and this is the fourth advantage of buying before foreclosure. As long as you have your lender, everything should be fine.
Of course, buying before foreclosure not only has these 4 advantages, but they are the main one. Having so many advantages to buying before foreclosure, does that mean buying before foreclosure is easy? I doubt it. Great bargains always take effort and good things don’t come easily unless you plan your strategy correctly.