Purchasing Homes in Pre-Foreclosure
The foreclosure process begins with the notice of default that is logged with the county clerk. From that time until the auction, there is a three month period in which you may purchase the home. Many investors will search these properties from the notice of default, through to the end of the auction. Once that notice of default is logged, it is time to develop a strategy for how to contact the homeowner for a possible sale.
The first is to do your research. Make sure the home has no additional liens. This is important because you do not want to be responsible for someone else’s loans against the property or unpaid taxes, etc. Determine the condition of the home. You may have a local real estate agent go around and take pictures of the property and perhaps do some of the research on the home for you.
Next, you want to contact the person who currently owns the home. Many investors will write a form letter and they will do blanket mailings to all of the homes they deem as potential investments. As I have heard and read, this method has a low rate of return phone calls, but it is worth a shot if just one person calls you to discuss a deal. You may want to get a professional broker or attorney to discuss the deal if the owner feels compelled to sell just to make sure that everything is legal.
Next, secure financing. This is perhaps the most difficult hurdle for most people when they get started in real estate investing. There are a couple of methods to help get started. You may want to start a partnership with someone. Perhaps in exchange for capital, you will do all of the legwork: finding the home, taking pictures, securing a broker, and due diligence. Before you propose this to someone, remember to do your homework. Have a list of homes you see as a potential investment and show them to the other person. Make sure you come off as confident, knowledgeable, and willing to work.
Another strategy would be to contact lenders. There are many lenders out there to contact to see if you can get preapproved for a home loan and proceed from there. Be honest and open with the lender and discuss your options. If they can’t help, perhaps ask if they know a company that would finance your operation.
If getting preapproved doesnt’ help, you may consider taking out a personal loan from your bank to finance your purchase. Many banks have limits for personal loans but start small; purchase a condo to start out.
Finally. you may want to consider taking a home equity line of credit out if you currently own your home. This would be a quick and cheap way of financing your first foreclosure.
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secured loan provider…
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