Is Pre-Foreclosure the Right Time to Buy?

A look around our site will prove to you that there are plenty of different stages when an interested buyer, looking for a bit of a deal, can take advantage of a tough market. One of these points in time is the re-foreclosure state.

Pre-foreclosure is a specific window of time in between when the lender issues a Notice of Foreclosure to the property owner and the time that the property goes on the auction block. There are both advantages and disadvantages to buying a piece of property at this point.

Advantages

Obviously, you are dealing with a property owner in a distressed situation. If they don't sell, they may lose everything. The right approach may help them see that if they take you up on your offer, they can cover their mortgage, save their credit, and walk away with money besides. It's a good time for people who can talk straightforwardly.

The biggest advantage stemming out of that is that you can purchase a home at a price significantly lower than market value. There are hardly any other real estate opportunities like it. The seller has an advantage too, in that they get to walk away from a bad situation relatively unscathed.

Disadvantages

As a buyer, one of the disadvantages is the same as the main advantage: you are dealing with property owners in a distressed situation. Many are bitter at this point, and many are stubborn. There can be an attitude of "going down with the ship", and despite all the sense you talk, they will not bend. Additionally, the property owners may not even realize that knowledge of their situation is now public. It can be a blow that is hard to recover from.

Sometimes, a house at this point can be more trouble than it is worth. People may have given up, and there are a lot of fixes to be made. And of course, it's doubtful that the owners will be amenable to a house inspection.

Pre-foreclosures can be great deals, but they do take the skill of a seasoned investor to truly be considered a bargain. Don't jump at one for your first home, but think about pairing up with an investor who can give you some tips in the area.