Purchase A Pre-foreclosure Condo ?Pre-Foreclosure Condo A pre-foreclosure sale is a procedure in which a lender allows a mortgagor- the home owner - to avoid foreclosure by selling the property for less than the outstanding balance of the loan.
For most investors, the best time to buy is during the pre-foreclosure period. That is the time between the published notices and the actual auction sale.
In order to buy during this period, you first have to make a deal with the homeowner.
Then you'll be responsible for making up the back payments owed to the lender, as well as any accrued foreclosure costs that may range from $500 to $2000.
How To Purchase A Pre-Foreclosure Condo
You will have to contact the home owner. Start with mailings. Indicate in your letter that you are a private investor and that you may be able to help them with financial problems. Moreover, that you may be able to stop the foreclosure, save his/her credit rating and provide cash for use in paying bills and/or for relocating.
Follow up with phone calls if you can. Be courteous,never pushy. Never interview the home's owner on the phone. Merely state that in order to determine whether or not you can help, you will need to meet at the property. If you feel comfortable with it, you can visit the property in person, but be prepared, you might find yourself confronted by an angry homeowner. Be polite and leave if you are asked to. Never, under any circumstance, snoop around, inspect or generally trespass unlawfully on somebody's property.
Inspect Property Loan Documents when considering the purchase of a pre-foreclosure condo.
Use an inspection checklist and record your information and estimated costs of repair the pre-foreclosure condo.
Make Your Offer If you are going to make an offer on the property, you must have the loan, ownership, and debt or lien information. You must also assess the condition of the property.
Determine the net equity in the property. This is the difference between the market value and the default amount plus liens and repair amounts.
Negotiate with the lien holder. You may offer to satisfy the lien for 20% of the amount. Remember to include closing costs in your calculations for the purchase and sale if you intend to flip the property. Also include the carrying costs, the mortgage payments, taxes, and insurances, while you hold, repair, and then resell, along with a seller's commission if you use a broker.
Settle the Contract
When the owner decides to sell, you will both need to sign an Equity Purchase or Real Estate Purchase and Sale Agreement. All parties recognized in the mortgage contract must sign accordingly.
Check with your attorney before signing any contract and make sure he is knowledgeable in real estate equity purchases.
Closing If you have not already contacted your attorney, you will want to as soon as possible to inform them that you have a signed contract and that you need representation at closing. Have him prepare a Release of Lien, to be recorded at or just prior to closing, if you have negotiated a settlement with a lien holder. Arrange your financing. If you assume the loan and have been in contact with the lender, make sure to stop the foreclosure process before the sale date.
Order your certified appraisals and inspections as required before closing. Order the termite and roof inspections as well. Verify from a title search that there are no other lien holders against the property. If all goes well, you just bought real estate well below market value.
Purchase pre-foreclosure condo - back to top of the page
|
