Homeowners at risk of losing their property have likely received notification from the lender; then, at about 90 days, the lender files a Notice of Default. The foreclosure process has begun.
Until a property is legally foreclosed, and before auction, there's a window of opportunity for savvy buyers to make deals with owners or lenders. This is pre-foreclosure, a period in which many believe investors stand to make the most money.
Only a few weeks' notice may be given that a property is about to go up for auction. You can find out through public records and legal notices, paid services, networking and referrals. If you move quickly after that notice, you can try for a last-minute deal with the owner, who may be quite motivated to sell at a low price since accepting an offer saves a strike on the credit record.
There's also a benefit to the lender, who prefers to get rid of a property before it goes into foreclosure. Lenders are delighted to avoid the hassle and expense of trying to sell foreclosed properties.
Besides getting a steal, there are additional advantages to buyers who strike pre-foreclosure deals:
- Unlike buying at auction, you'll have time to inspect the property.
- You may not have to pay the entire purchase price up front in cash.
- There may be less competition for pre-foreclosure properties than at auctions.