PREFORECLOSURE VS. FORECLOSURE

Originally published at Real Estate Blog at Fizber.com. You can comment here or there.

Preforeclosures are properties that are acquired from a delinquent, distressed or defaulted seller prior to the foreclosure sale. At this stage, you can often negotiate with a homeowner who has run into financial difficulty and very often get a great deal while helping someone out. A STRONG word of caution - NEVER take advantage of anyone's misfortune for your personal gain. You can ethically purchase pre-foreclosures, and make life long connections in the process (perhaps you can get a real estate license, keep in touch with these folks, then refer them to a real estate agent to purchase their next home - or sell them one yourself!).

Are Foreclosures Really Good Deals???

The answer of course is...it depends. First, you need to identify for yourself, what makes a deal good? Good price? Good Condition? Good Terms? Some combination of the three? Most people have heard the hype on late night tv and in the media about how others have "effortlessly obtained homes for pennies on the dollar". Does this really happen? Sure it does. Is it as easy and often as they might lead us to believe? I don't think so. There are certainly a number of properties today that can be a "good deal" for most buyers and investors since our number of foreclosures are through the roof and there is an already large supply of homes for sale apart from them, but then you need to ask yourself when is the best time to buy?...

The good side to the "Pre-Foreclosure "opportunity is that you, the buyer, are dealing with the Homeowner directly. It can be a very good opportunity to not only buy the property at a potentially good price, but also see that you really are helping someone out in the process. Contrary to some people's beliefs this is the stage in the game where you can help save someone's credit, self-esteem, and maybe give them a hope at a new start.

You may run into a problem if they owe more than the home is worth , unless they are going to pay the difference. You would then have to try and execute a Short Sale with the lender to purchase the property for less than what is owed to the bank.

The important thing to remember is that just because something says "Foreclosure" or "Corporate Owned" or whatever term is used, it doesn't make it a good deal for YOU.