06 January 2009 00:46am
Pre Foreclosure
Buying a pre foreclosure property involves much less competition than when buying at a foreclosure auction and can be very profitable for the individual investor.
Buying a pre foreclosure property involves much less competition than when buying at a foreclosure auction and can be very profitable for the individual investor. The difficulty is to locate the pre foreclosure homes. Some people hesitate due to moral issues. Many people wonder whether they are helping the homeowner or if they are taking advantage of his misfortune. But in fact by buying a pre foreclosed home could help the home owner to bring him up to date with his debts and you could help him maintain good credit references.
When buying a pre foreclosure home, there are a few steps to follow:
Finding the Pre Foreclosures
Lis Pendens (notice showing a legal action is filed and pending) are documents posted in county and city courthouse buildings listing home owners who cannot pay their monthly mortgage installments and taxes.
Contact the homeowner
Contact the homeowner by mail, phone or in person. Indicate that you are an individual private investor that is looking for a property in that specific reason and that you could help him with his financial situations.
View the property
Inspect the property with the homeowner. Authenticate whether the property needs major repairs or alterations. How much it is going to cost you and how long it might possibly take.
Prepare your offer
Calculate the cost you are willing to pay by taking the market value and subtracting the repair cost, the default amount, the liens, taxes and carrying costs. Negotiate your offer with the homeowner.
Prepare a contract
If the has decided to sell according to your agreements, you and all the parties recognized in the mortgage contract will have to sign a purchase contract. Best is to let your attorney compile this contract for you, to ensure that everything needed is there to make the contract totally legal.
Close the deal
When everybody has signed the contract, it is necessary to inform your attorney to prepare a release of Lien. You should now arrange your financing and do all inspections on the home you intend to do before moving in.
Remember to act fast; you can act to make an agreement from the listing day until the property is offered for sale at auction. This may take about 90-120 days depending on the state.
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