Pre-Foreclosure 101
A lot of people have been asking about foreclosures and short sales these days. Often times the conversation begins with how to define these terms. To begin with, a Short Sale is when a bank allows a home owner to sell their property for less than the bank is owed on the mortgage.
A property enters pre-foreclosure after the owner misses a number of mortgage payments (usually three or more) and thus defaults on the loan secured by the property. At that point the lender files either a Notice of Default or Lis Pendens (pending lawsuit) against the borrower/owner.
During the pre-foreclosure period, the owner may be able to stop the foreclosure by paying off what is owed (known as curing or reinstating the loan), by selling the property or by transferring ownership of the property to the bank (known as a deed in lieu of foreclosure). If the owner does nothing to stop the foreclosure, the property will be sold at a public foreclosure auction at the end of the pre-foreclosure period. The length of the pre-foreclosure period is determined by state law.
Buying a property that is in pre-foreclosure involves creating a win-win-win scenario for everyone involved — the owner who gets out from under the property he can’t afford without damaging his credit, the lender who doesn’t want to be a property owner to begin with, and the buyer who purchases the property at a substantial discount.
Creating such a winning scenario takes persistence, careful research of profit potential and a willingness to walk away from deals that don’t make sense financially. But a properly structured pre-foreclosure purchase usually allows you to buy property at a discounted price.
Buying during pre-foreclosure also offers some distinct advantages over buying at other stages in the foreclosure process. Unlike buying at a public auction, you don’t have to produce a large amount of cash on the spot and you’re able to conduct a full inspection of the property before taking ownership. And unlike buying a bank-owned property, you don’t have to pad your offer price with the extra tens of thousands of dollars that it can cost a bank to completely foreclose and repossess a property.
There are currently over 330 pre-foreclosure properties listed in the Charleston area. If you'd like more details on these properties let me know.
A property enters pre-foreclosure after the owner misses a number of mortgage payments (usually three or more) and thus defaults on the loan secured by the property. At that point the lender files either a Notice of Default or Lis Pendens (pending lawsuit) against the borrower/owner.
During the pre-foreclosure period, the owner may be able to stop the foreclosure by paying off what is owed (known as curing or reinstating the loan), by selling the property or by transferring ownership of the property to the bank (known as a deed in lieu of foreclosure). If the owner does nothing to stop the foreclosure, the property will be sold at a public foreclosure auction at the end of the pre-foreclosure period. The length of the pre-foreclosure period is determined by state law.
Buying a property that is in pre-foreclosure involves creating a win-win-win scenario for everyone involved — the owner who gets out from under the property he can’t afford without damaging his credit, the lender who doesn’t want to be a property owner to begin with, and the buyer who purchases the property at a substantial discount.
Creating such a winning scenario takes persistence, careful research of profit potential and a willingness to walk away from deals that don’t make sense financially. But a properly structured pre-foreclosure purchase usually allows you to buy property at a discounted price.
Buying during pre-foreclosure also offers some distinct advantages over buying at other stages in the foreclosure process. Unlike buying at a public auction, you don’t have to produce a large amount of cash on the spot and you’re able to conduct a full inspection of the property before taking ownership. And unlike buying a bank-owned property, you don’t have to pad your offer price with the extra tens of thousands of dollars that it can cost a bank to completely foreclose and repossess a property.
There are currently over 330 pre-foreclosure properties listed in the Charleston area. If you'd like more details on these properties let me know.
posted by Chris Haviland at
8:38 PM
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