Looking to purchase an affordable house? Why not consider a pre-foreclosure property? You probably see real estate listings for pre-foreclosure properties for sale all the time but don’t bother to look at them. However, here’s why you should.
Why Consider a Pre-Foreclosure Property?
First, know that a pre-foreclosure property is one that’s usually distressed and the lender hasn’t repossessed and auctioned it off yet. This means that they usually still have occupants who have unfortunately failed to keep up with their mortgage payments. The owner/occupant is also probably trying to prevent a foreclosure. While the property could be at pre-foreclosure, it might not really be for sale.
If you’re unsure about asking the owner is a pre-foreclosure home is on sale, check the property’s listing online and in public records and if it is, you could then decide if you want to purchase it. If it is for sale, you won’t necessarily have to arrange a home loan and then put down a down payment as you would a typical home purchase. Rather, you would have to cover everything the owner/occupant owes the lender.
This means that you’d have to pay off the balance of the mortgage, any property liens, as well as any unpaid homeowners insurance and mortgage payments, explains one of the top mortgage lenders in Ogden. He adds that while the entire process will go more smoothly if you’re able to pay everything in cash, you also have the option of taking out a mortgage to purchase the pre-foreclosure house.
Once you’ve decided to make your offer, keep in mind that you could provide the owner/occupant a price that’s slightly lower than the home’s value, because you might need to do your own repairs before moving in. You must also include contingencies in the offer that would enable you to halt or get out of the deal in case your title search exposes issues with the property’s title or if you discover significant problems with the house during the home inspection.
Should You Go with a Pre-Foreclosure Property?
Purchasing a pre-foreclosure property is an excellent chance to buy property that’s significantly lower-priced than current market prices of similar properties. You also won’t have to compete with other potential buyers as you would if you purchase a foreclosed property during an auction. However, take note that you’d have to have money to negotiate with the seller and this is the primary reason that buyers of pre-foreclosure properties are usually seasoned property investors and not people buying their first home.