How to Buy a Foreclosed Home Before it Has Been Foreclosed

For those interested in learning how to buy foreclosed homes, one strategy is to go after the property before it has been foreclosed. How can you buy a foreclosed home before it's been foreclosed? You buy it in the pre-foreclosure period, that window between the time the homeowner has been officially notified by the mortgage holder that the home is going into foreclosure and the final date of the foreclosure.

Buying properties at pre-foreclosure does give you a few advantages. The homeowner can be desperate and agree to do nearly everything to prevent the actual foreclosure. That foreclosure goes on his credit record for at least 7 years. And worse, if he ever applies for a mortgage again he must disclose that he has had a foreclosure, even if it's been more than 7 years ago. In most cases, the options to avoid a foreclosure are pretty limited.

Another advantage is that you can inspect the property closely before purchasing; you don't have that option when you buy at auction. At auction you buy based on a description. And, if you talk with the homeowner in person and he has not listed the house, he will avoid paying the commission to the real estate agent, which might allow you to negotiate a lower purchase price. The average real estate commission is six percent which is about $18,000 on a $300,000 sales price.
Purchasing pre-foreclosure properties should be a win-win situation for both you and the homeowner: You can find amazing deals, and the homeowner may escape a very horrifying financial situation.

However, before you approach the homeowner, keep the following things in mind:

You shouldn't mislead the homeowner. Do not represent yourself as a lawyer, financial advisor, an accountant, or real estate agent.

Never make friends with a homeowner solely to lure him to sell the house to you.

Encourage the homeowner to call the bank and his lawyer to advise him on the transaction. Never try to outsmart other interested parties.

Put every agreement and offer in writing. In real estate dealings, verbal agreements do not stand up in court.

Always let the homeowners decide what is best for them. You shouldn't simply look out only for your own profit. The goal is to get a win-win result: talk to the homeowners about the other options available, including bankruptcy. Never try to influence: Always represent yourself with honor and integrity.

Knowing how to buy a foreclosed home before it becomes foreclosed can be a good option for both you and the home owner.