Pre-foreclosure Versus Foreclosure – Pros of the ‘Pre
It’s unfortunate but foreclosed homes currently represent half of all of all the homes sold in the US. Before the bank forces foreclosure there is in a period called pre-foreclosure which can last anywhere from two to twelve weeks. Many of the real estate gurus have made a fortune on pre-foreclosures and consider it as one of the best, if not the best, way to invest in real estate.
Many of the ‘for sale by owner’ signs that you see are from owners that are in pre-foreclosure. The bank usually allows the homeowner time in which to try and sell their home before it is foreclosed. This is common because the bank is not in the real estate business and would prefer the current owner sell the home to cut their losses rather then having to seize the home themselves.
Here are several reasons that real estate experts feel it?s a better idea to purchase a home during a pre-closure period instead of waiting to buy a foreclosed home at a government auction:
- A pre-foreclosed home could actually be cheaper then foreclosure because you are dealing one-on-one with an owner who desperately wants to avoid foreclosure.
- Because you are working with the owner you’ll be able to ask questions about the property you wouldn’t be able to otherwise.
- Typically less competition then at a foreclosure auction where there is multiple bidding for the same property. Foreclosures attracts more of the mass real estate market then pre-foreclosures does.
- More time to evaluate financial scenario then at an auction.
- Auctions can be either overwhelming or lead to egotistical or emotional decisions.
- You have more time to have a pre-foreclosed home inspected than you would at an auction. You will be aware of any potential problems the house may have.
- You will be allowed to make a low down payment on a pre-foreclosed house. At a government auction you would be required to pay the total amount in cash.
Make sure you bring along an inspector when you check out a pre-foreclosed home. You should also check to make sure there are no past judgement liens or unpaid taxes on the property. The risks in buying a pre-foreclosed home are about the same as buying a home the traditional way through a real estate company, but there are a lot more advantages! You can even buy a pre-foreclosed home and then resell it for twice as much!