What happens when purchasing a property that's in Preforeclosure?

Like any house it depends on HOW you buy it. If you get a loan then you do not own it free and clearn. If you pay cash then you own it free and clear.

The bank likely will not let you take over the loan. At this point they just want the cash.

You make an offer, The seller agrees. If it's a short sale, the bank signs off on it. You pay. You own the house.

We on the same boat but according to what I learned so far from many info. in here, the best approach to pre-foreclosure is to locate the property and the owner first. At this point the lender had already file for the owner to pay up at so and so date or else the property will go on auction. Because the home owner is under a lot of stress at this point it is recommended you write a letter to the owner and indicate your intention about the property instead of driving up to his/her home. Establish some kind of mutual understanding with owner. Once you establish that common grounds you can work your magic. Talk to him/her about credit ratings and all if he is not going to do something about it now.

Offer to bring his/her payments up to date and you may consider paying the equity on the property in the form of notes (over a period of time @ certain %). Remind the owner of losing it all if he goes the other direction instead. Ask the owner if its okay that he carries the mortgage for a certain period (2 yrs.) until you bring your credit or what ever to par and apply for your own mortgage at a later date. Make sure you both agree that he/she will sign to give you the deed or the tile to the property.

The key here is for the owner to trust you that you can do it. Most of the time they will be worried about us not living up to our part of the bargin. You may tell him to open an Escrow account for you as a buyer to deposit your equity money as a payment to the owner and if you default the Escrow Officer will automatically activate the tile back to the owner and you lose it all. In most cases this technique can give the owner a peace of mind.

Okay, I am going from here and there but I hope you get the message. Good luck and GOD BLESS!!!

VV

Alright, so when I nogotiate a price with the home owner and decide to buy the house (in preforeclosure), who gets the money? The bank or the home owner?

Ok. Now is the sellers turn to convince the lender that you can take over the loan. The lender will have the last say on Pre-Foreclosure homes they may not release the seller from the obligation to pay up in case you default. You have the title or deed, the mortgage is still under the sellers name until you get your own overtime. The sellers money again can be armotize to 10- 20yrs @ certain %. You do this so that you dont squize your pocket out to much when you begin your mortgage payment. The key here when you take over, build your equity quickly 5-10yrs and refinance.

OKAY I NEED HELP HERE FROM YOU TOP INVESTORS IN HERE!!!!!

Kane:
Wmark1963 was spot on.

If you find a home in preforeclosure (meaning the seller is still in the house and the bank hasn't taken it back yet), then that CAN be a good property. A foreclosure DOES NOT EQUAL A SHORT SALE!

Whether your write a letter, postcard, try to call him, or leave your biz card on his front door, make contact as early as you can. I like leaving a card taped on his door. You CANNOT touch his mailbox - that's a federal crime, but you can tape a card or note to his door. Of course, if it's a security building or complex, then you might have to go the letter/card way. As Dean says, be mighty respectful in all coummunications.

Now, if seller is in foreclosure, he's already in hot water. Don't ever count on a bank LETTING you take over payments - that's not going to work.

If you're a big fish, and can qualify for your own financing, then that's just great and you and seller can start dealing with bank so you can make a new loan to replace seller's and he's off the hook, and everybody is singing and dancing and clapping. That's a good situation.

You want to appeal to seller in 2 ways: 1. if you can get a new loan and get him off the hook, then his credit is saved. If it's a short sale (and they're so dog-gone tricky and dangerous for 100 different reasons), then you can appeal to seller that his credit will only suffer for 2 years. There's a lot of misinformation about a short sale's impact on your credit reports. Most think you'll suffer for 2 years, and that's about right, but fact is, it WILL NOT ROLL OFF YOUR CREDIT REPORTS IN 2 YEARS! NOPE! I don't care what anyone tells you. It's like a BK lawyer telling you it will roll off your credit reports in 7 years - NOPE! IT'S 10! And you better count on the fact that if the bank forgives you for say $35k, that's posted on your credit reports as penalty. As a matter of fact, if you're a seller trying to sell on a short sale, make sure you get an attorney's advice because that $35k loss to the bank is issued in the form of a tax statement that the bank counts as income for you, and you better claim that "income" on your tax returns or you're in big doo doo.

There are basically 2 different types of short sales - one where the bank has already approved the seller to allow him to sell at a bottom-dictated price. Meaning if seller has a loan for $100k, after months and months of fretting and sweating, bank finally agrees to let seller go for a short sale, but minimum sale price is say $65k.

Then there's the other kind of short sale where the seller's in a whole lotta trouble, hooks up with a realtor, puts the property up for sale and claims it's a short sale, but bank hasn't yet approved it. Sometimes a bank won't give permission for a ss until an offer has come in. Then bank will hire a broker to make what's called a broker's priced opinion re what it's worth. Depending on if the bank thinks the BPO is as much as bank can possibly get back, it will weigh the real new offer based upon the BPO.

Then that starts the ball rolling and the bank now sits back with arms crossed in front of it and waits and waits for more offers to roll in. Meanwhile, the poor original buyer making first offer is fretting and sweating, like the poor seller, wondering what oh what is happening with my offer. This takes MONTHS. That's one reason I stay away from short sales. You/original buyer can continue to look for other properties, but here's the tricky part:

On a short sale purchase k, there are 2 contingency phases: 1 for the seller and 1 for the buyer. If you don't know exactly what you're doing as a buyer, and haven't understood the contingency phase correctly, YOU CAN STILL BE ON THE HOOK WITH YOUR OFFER even if you've moved on and made other offers and maybe even bought a property in those months period. I'm not talking about buyer's contingencies like financing and inspections. If you've moved on and purchased another house, you can be on the hook for liquidated damages. So folks, just be careful re short sale and make sure your realtor knows exactly what s/he's doing.

That being said, ss can be great, and you can scoop up some real values and lord knows there are tons of ss out there, but you and your realtor better know exactly what you're getting into.

I like foreclosures; pay cash or get a prequal letter from Coastal Funding and use a HML to purchase and have an investment buyer all lined up and do your double closing on the same day.

These are just SOME of my thoughts on ss; there are soo many nuances to both foreclosures and ss! Really look deep before you leap!

Happy hunting!
Jenny

A friend's daughter is getting divorced. They are in default. They still owe about 225K on their townhouse. The comps are only about 210-215K. I'd like to offer them around 180K. Can this scenario work? Would this be considered a short sale? Any advice is appreciated! Beth

That will definitely turn into a short sale. She will have to get permission from the bank to accept that offer. Everything that Jenny is talking about will affect her.

I would go in with 160k offer to the bank. After closing and other costs I think you will be too close to the FMV.
My opinion. be agressive.