What are the advantages and disadvantages of buying a pre-foreclosure

When working on buying foreclosure properties at any point, u have to realize that u do not have time to fool around, because there is no shortage of people that want to buy a home for $100,000 under market value. The really good deals last about five minutes.

On the other hand, u can buy a really bad deal in a hurry, too, so making snap decisions will cost u money.

You have to know how to check the land records yourself to find all the liens against the property, how to estimate current loan payoff amounts, & how to estimate the cost of structural matters. And u have to be able to do all of that faster than the other people that want to do what you're doing.

In my experience, banks do not negotiate much with buyers. They will sometimes negotiate with sellers, but they r not interested in getting into negotiations with someone that may or may not actually buy.

However, sellers can be hard to work with if they have no equity. They do not like the idea of signing a contract that has them bringing money to the closing table, in the hopes that the payoff can be negotiated for less than the full amount.

Once the bank owns it, it is anyone is guess whether they r easier to work with, or will give a lower price. Sometimes the block to a seller sale is the second mortgage, which is now gone, & u can get a better price. Generally their contracts r so lopsided on the non-price terms that it is actually a chore to get them to the closing table.

It varies. Buying foreclosure properties at any stage is not for the faint of heart. If you're new to real estate, get a really good attorney, as the pitfalls r pretty deep.

Personally, I see no advantage to purchasing a home that is in the 'pre-foreclosure' phase. Years ago, purchasing a foreclosure home was usually a good buy -- not so today! Many homes that will be foreclosed on in the future have too much debt on them to be any great bargain when the jig is up. Banks r not as flexible with the prices & u would do just as well to look for homes with a realtor & make offers on homes. Sellers who r in that 'pre-foreclosure' phase r usually in dire straights & it is never easy to deal with people whose backs r against the wall (literally!) It is a buyer is market out there -- be sure u check out the normal channels for purchasing a home before u get caught up in the business of dealing with amateur sellers. Unless u r very savvy in these matters, u will be glad u had the assistance of a good buyer is agent when purchasing a home. They cost u nothing (sellers pay the commission) & they will work their fannies off to find u the house of ur dreams -- & then walk u through the process to the closing table. Well worth it!

The advantage of a pre-foreclosure deal is that u r negotiating with the owner, not the bank; the owner may be willing to sell his equity (if there is any!) cheaply to avoid having a foreclosure on his record. The disadvantage is that u then need to deal with the due-on-sale clause in the mortgage, whiich means negotiating with the bank. You may be able to take over the existing paper, or may not, depending on ur credit record & what has happened to rates since the original mortgage was written. I think that if I were trying this, I'd talk to the bank first & see what they have to say.

no, if the bank gets the property, it would most likely go up for auction. that would mean that many people would have a chance to make an offer, driving up the price a little. it may also be tieed up in court for months before sale. if you can get it before foreclosure, you can use the leverage of keeping someone out of bankruptcy to lower the price. offer them exactly what they owe on the house. they keep good credit and you get a steal.

You can not always count on the bank to list it at a lower price because they are going to want to get their money back from the default on the loan. So at the very least, they are going to try to recover that outstanding debt. The current owner will try to preserve their credit, so even if they do not get their full asking price, they may be willing to sell just a little lower than their outstanding debt - preserving a good credit is better than bankruptcy any day of the week.