Buying Pre Foreclosures: An Investor’s Guide

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Foreclosure property investing is a common strategy in real estate, yet many investors have yet to uncover the benefits of pre foreclosures. Read on to gain an understanding of the pre foreclosure definition, how pre foreclosures are different from foreclosures, and how to buy a house in pre-foreclosure.

What Does Pre Foreclosure Mean?

The pre foreclosure meaning is the stage in which a Notice of Default has been issued to the owner of a property, but before the property has been listed to be sold through a pre-foreclosure auction. Although buying a pre foreclosure can be challenging, investors often find that pursuing pre foreclosure homes is well worth the effort, as they can usually be acquired below market value.

Pre Foreclosure Vs Foreclosure

There is a distinct difference between a pre foreclosure listing and a property that has entered foreclosure. A property enters foreclosure when the owner has failed to make mortgage payments, and the lending institution takes possession of the property as collateral. Once the property is in foreclosure, the lender will re-list the property for sale and usually at a discounted price. A pre foreclosure process, as mentioned in the section above, is usually in the stage in which the owner has already been given a default notice, but has not actually been foreclosed upon yet. In line with this, pre foreclosure properties are not necessarily up for sale until they are officially in the foreclosure stage. Investors who identify owners who are in the pre foreclosure stage have the benefit of negotiating a deal before the property has been listed.

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how to find pre foreclosure homes

Where To Find Pre Foreclosure Listings

  • County court office: Laws and regulations differ from state to state, but oftentimes Notices of Default (NOD) are recorded with your local county court. Contact your local county court office and ask if and how you can search through their NOD filings.

  • Online records: In some cases, counties provide property databases online. To check whether or not this service is available in your locale, you can visit your county website or search the name of your county followed with search terms such as “property data.” From there, you should be able to find any online records that are provided. Most county databases will provide the option to filter searches by property or document type, thus helping to create your pre foreclosure list.

  • Legal notices: You can also find properties that are up for pre foreclosure auction by searching the legal notice section of the newspaper. This section will publish pre foreclosure listings that will be going up for sale at a foreclosure auction. You can use the property data to search for the title company that recorded the NOD, and then reach out to that company to obtain their list of pre-closure leads. However, note that this company may expect you to use them for your pre-foreclosure sale closing in exchange for their lists.

  • Real Estate Agents: Since real estate agents have access to the MLS, they are a viable source for finding pre foreclosure lists. They are able to narrow down their search in the MLS to only provide pre foreclosure listings. Using a real estate agent means you will be getting professional help as well, and all the heavy lifting will be done for you. You will have peace of mind knowing they will handle any paperwork efficiently and correctly. They will be able to find a pre foreclosure listing, schedule any appointments, and professionally negotiate in your place. You will have to compensate your agent meaning the pre foreclosure listing will technically be at a higher price to cover your agent’s commission. Also, you will have to work according to your agent’s schedule most of the time.

How To Buy Pre Foreclosure Homes in 8 Steps

  1. Start your search. Part of what is pre foreclosure real estate is the trickiness of finding properties. Those wondering how to buy a pre foreclosure home, and how to find pre foreclosure listings for free, should be prepared to spend a significant amount of time in the research and marketing phases. First, you can search through online pre-foreclosure listing sites, including those published in the county records. In addition, some general real estate listing sites such as offer a pre-foreclosure specific search filter. You can also start marketing yourself as a buyer through the use of bandit signs or on Craigslist.

  2. Get in your car. Once you have identified a property or two of interest, it is time to hop in your car and drive by the property to get an idea of its condition. However, keep in mind that the owner may still occupy the property, so be respectful.

  3. Get status updates. When identifying pre foreclosure listings, also make sure to write down the name of the trustee or attorney, which will often be the title company. You should contact the trustee to get status updates on the property, for it is not uncommon for home owners to resolve their financial issues in an effort not to lose their property.

  4. Know your numbers. If the data is provided, make note of the outstanding loan balance and liens on the property. You can use available data points to get a rough estimate of the would-be foreclosure sale price. Then, subtract the amount it will cost you to acquire the property so that you can come up with the figure at which you would break even.

  5. Launch your campaign. Once you feel prepared, it is time to launch your campaign to the owner for the property. You may be able to reach out to the directly by a phone call, but most likely you will need to design a direct mail marketing campaign. During this step, keep in mind that the owners are in a state of distress, so tailor your messaging in such a way that highlights the solutions you can provide, while remaining tactful. Some homeowners may be in a state of denial, so you be prepared to follow up as necessary.

  6. Make an offer. If the homeowner is receptive, you may venture to ask for a tour of the property to help you get better estimates on the cost of repairs or renovations. The estimated figure should be factored into your break even number, before you make your offer to the homeowner and enter negotiations.

  7. Compose a purchase agreement. Once you and the owner have reached a deal, it is time to put it into writing. It may be in your best interest to work with a real estate attorney, or an agent who specializes in foreclosures, to help you compose a purchase agreement. Be sure to include any applicable contingencies, such as one for an inspection or title search.

  8. Enter escrow and close. Once the purchase agreement has been signed by both parties, an escrow company will serve as the neutral third party to transfer funds and ownership before closing. Once all contingencies have been lifted and the closing date has been reached, the property should now be officially yours.

Pre Foreclosure Process: How To Make An Offer On Pre Foreclosure Homes

Making an offer on a pre foreclosure home is an art, and investors need to pay close attention to the cues from the current owner to determine their strategy. Some owners may be readily willing to sell, while others may be in a state of denial and completely unwilling to sell. Regardless, the easiest way to make an offer is to buy the property directly from the homeowner, and offer to make up the back payments on their mortgage. Investors should make note that sellers are often in a state of distress; tactfully providing a fair solution so that the current owner can avoid foreclosure can help yield positive results.

preforeclosures listings


Investing in pre foreclosures is a popular strategy amongst investors for multiple reasons. The main motivators include the creation of deals that offer deep discounts for the investor, while helping the home owner avoid foreclosure. In addition, negotiating property deals before they even hit foreclosure auctions and lists often helps investors obtain an even bigger discount. Although finding pre foreclosure homes and negotiating with the owner can be tricky, many investors find the payoff well worth the effort.

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Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies