You would be better off doing a preforeclosure short sale then to waste time procrastinating only to allow the bank to foreclose and kick you out.

When you find yourself in a tight situation such as foreclosure you really do not want to admit to yourself that the bank is indeed going to take your home.

Your emotional connection will not allow you to fathom the thought of strangers coming in and telling you that you have “x” amount of days to gather all of your belongings and find somewhere else to live.

Especially since your name is on the deed and the house is of such beauty.

pic courtesy of Rhansman

Who do these people think they are?

Well, unfortunately, these people work for the bank, who is the true deed holder, and they have every right to evict you once the judge signs the documents at the court house giving them the o.k. to take possession your property.
Once this happens, there is no turning back.

Very seldom will the bank contact you after the foreclosure and ask if you can help sell the home and that is usually only in very distressed areas.

A preforeclosure short sale can save you two things:

Embarrassment – If you sell the home before foreclosure, then there will be no public notifications that your home was taken away from you. You also will not come home to a big yellow notice on your front door for all your neighbors to see, telling you that you no longer have possession and you now have to vacate the premises.

Credit – When you are only in preforeclosure status the bank is notifying the creditors that you are late on your loan. We all know that having lates on your report are rectifiable in a matter of 12 months.

However, if the bank forecloses on the property, you now have a judgment on your report which basically tells creditors that you are not a good payer and they had to go to court for a judge to give them back what you were supposed to be purchasing.

This can take as long as seven years to come off your credit.

Not a good look.

Short sale your property and walk away with your head held high. You can recover from this with dignity.

The purpose of sending out preforeclosure letters is to inform the owner of the home that you are aware of their pending foreclosure status and that you are interested in helping them.

When writing these letters, however, you must bear in mind that these owners are going through something personal and they are not ready to just part with something so dear to them.

You must sympathize with their situation and inform them that you understand what they are going through and that you are only there to help. Then you should tell them why it would be in their best interest to allow you to help.

Inform them that this would help to save their credit as much as possible because of course it is better to have just lates on their report instead of a foreclosure.

I would also advise that you personalize the letter with their first and last name.

Write to them as if you were talking to a friend.

Send your preforeclosure letters in regular white envelopes and hand write their name and address. This shows them that the letter is coming from a real person and not some big company.

If you follow these procedures, you should have no problem getting many responses which should lead to deals.

I enjoy pre foreclosure investing mostly because you don’t have to deal with a bidding war on a property that is being bought for less than its actual worth.

You can approach an owner that is about to lose their home and offer to purchase before it goes into foreclosure.

This should entice the owner because it’s better to have a bunch of late payments on their credit than an actual foreclosure.

It’s good for the bank because they don’t have to take possession and put this property in their inventory. They are not in the business of selling homes, therefore, they would rather negotiate a discounted profit then no profit at all.

The most tedious task in pre foreclosure investing is negotiating the price with the bank.  Depending on how desperate they are, sometimes you can get the bank to take as low as fifty percent of the original purchased price, especially in today’s market.

In a typical market, the discount is usually between seventy and eighty percent of the original loan amount.

Although it can sometimes take up to two years to get a response to your offer, there are many laws being passed that are starting to make these banks respond a lot faster.

In some cases you can get an approval as fast as thirty days. These are the lovely deals.

Yeah it has been a minute since I wrote here on my blog but that is because the real estate market has actually taken a spike in the upward position.

Investors are now buying, whether it is a preforeclosure, foreclosure or REO.

My colleagues have been calling me asking if I know of any great deals.  The funny thing is, those that buy cash have been asking and those investors that want to get rid of their properties have been contacting me for buyers.

Although I am not a licensed real estate agent, I have been lucky enough to have a load of investors, like myself, who come to me for either properties or my database of buying investors.

I, myself enjoy buying REO’s but I prefer buying preforeclosures.

My reasons are because:

1. It is much easier to negotiate with an owner of a property than it is with a bank after foreclosure.
2. The owner is in a really tight bind and because they know they will not get any profit on the deal, they can care less what you offer the bank.
3. The bank, in turn, would rather sell the property at a discount than to foreclose on it.
4. I can offer as low as the market calls for minus repairs and don’t have to worry about a bidding war.

Although these are all the positive reasons for buying a preforeclosure, there is a negative aspect to it as well.  That reason is there are some banks that take up to two years to approve your offer.

I said approve because very rarely will you get a disapproval,  especially if you know the market and possible construction cost on the property and offer in the “fair” range according to these numbers.

Despite the possibility of a long wait, I’d rather deal with the wait on a short sale approval than to put down a deposit and have my money held up for months waiting on an approval or disapproval.

That money they hold can be used for other opportunities that I may be missing out on while I wait.

When buying a preforecloure you do not have to tie up your money in any way.

A pre-foreclosure is the time period from when the borrower misses 3 to 6 months of mortgage payments. The bank then starts litigation to foreclose on the property. Once they contact the courts and the borrower is served with notice that they (the lenders) have started the foreclosure proceedings, the home is considered a pre-foreclosure.

In other words, right before foreclosure.

Why should you go after a pre-foreclosure?

Banks are not in the business of holding on to properties. Although they do not want to take the house from the owner, they feel that they have no choice.  Lenders usually accelerate the proceedings because they are unable to get in contact with the borrower.

Borrowers sometimes feel like they are stuck between a rock and a hard place with no way to pay their mortgage. So instead of talking with the lenders, they rather “duck and dodge” their phone calls, not realizing this just makes matters worse.

The only good thing about pre-foreclosures for the borrower is, they have between one and two years before the actual foreclosure takes place. This means they can live in their home mortgage free for this time period.

This is the time that you get in to convince the borrower that you can help them get rid of the home before they have a foreclosure on their credit.

What many people fail to realize is there is actually a process to the foreclosure proceedings. Although you receive notice that the lender is starting to foreclose on your home in as little as three to six months of being delinquent on your mortgage, it is still going to take them at least another six months to a year to actually get the approval from the bank.

Therefore, here are the four steps to stay in your home mortgage free for at least a year and a half during foreclosure.

1)      Ignore the foreclosure statements – It sounds crazy, but there is no need to remove all of your belongings as soon as you get notice. As I mentioned it takes about six months to a year to even get the courts approval.

2)      Once your first year is almost up, if you have income, you can try to start your own loan modification – All you need to do is contact the bank and show proof that you can pay a lesser amount of the mortgage. This process usually takes a couple of more months to get an approval or denial, but meanwhile, the bank will put a hold on the foreclosure proceedings.

3)      Contact a bankruptcy lawyer – Also after the first year, contact a bankruptcy lawyer and begin the proceedings. Even if you can’t afford to pay the bankruptcy, this also stops the foreclosure proceedings until everything is verified.

4)      Due a short sale – Believe it or not, this proceeding alone can take up to a year. This is probably your best option. Because banks are overwhelmed with foreclosures, once they receive a contract on a home, they will postpone the foreclosure until they come up with a decision on the short sale. Most of the time the short sale is accepted and if not, then they will just negotiate it up a little higher. Either way it buys time.

If you are in a situation where you may loose your home, do not panic. There are many options for you including contacting the HUD programs that help pay for some of your mortgage payments, depending on how much you owe and what you can now afford.

If you find that HUD can’t help and the foreclosure is still in progress, then try the above. You will be surprised at how much time they can buy you.

Whatever you do, do not abandon your house and just leave it distressed.