Do Pre-foreclosure Deals Still Exist?

By Author: findforeclosure
Total Articles: 2
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These are exciting times for real estate investors. Between bank owned properties (REO's) and homeowners in default (pre-foreclosures), there are literally deals everywhere. But which ones should you pursue?

Right now the deals most investors are going after are REO's because they are so prevalent. However, there are still a good number of pre-foreclosures with equity available avoiding the attention of brokers because of the number of REO's.

Most of the investors I know tell me that there is no point in going after pre-foreclosure deals because no one has equity and everyone is doing a loan modification. When I hear that I just say, "You could be right." However I know that is not always the case. The reality is that many homeowners are requesting loan modifications but few are actually getting them. The reasons vary but here are some of the main ones.

No Income: No income or not enough income is the most obvious reason why a homeowner would be declined for a loan modification and with so many people out of work this is most often the case. Unemployment income simply isn't enough and it's only temporary. ...
... Therefore, it's not considered by the lender.

Too Much Equity: This one may surprise you but the more equity an owner has in their home the less likely they will be approved for a loan modification. Why? Because if they have 30% of equity or more, the lender will in most cases recommend the owner sell and pay them off instead of modifying the loan and taking less. It makes sense, right?

They May Sell the Home: The other reason may be that investors are not pursuing pre-foreclosures because they assume an owner with enough equity will just put their house on the market, and sell it, but again that's not always the case. Most owners in default spend all their time trying to find a way to keep their home. By the time they realize they need to sell, there is no time to do so. The average time on market these days is 3-4 months. Also, a lender is unlikely to give the owner more time to sell--especially if they are already 6 months behind on average-when they know a house with at least 30% equity will sell at the auction, thereby making the lender whole. If it does sell at the auction, the owner typically gets nothing because of all the collusion that happens there.

So where does that leave the owner? Well, hopefully you would have already developed a relationship with them. They will then consider you to be a final option that will help them keep some of their equity, thereby giving them a fresh start.

Finally, I want to leave you with this little hint. I ask every owner in default who has come to talk to them about their house. The answer is almost always the same: real estate agents and loan modification companies that charge for their service. So who's missing? You, the investor, who can buy his home and give him cash for his equity and a fresh start.

Get the hint? Get on the phone!

You might consider purchasing a house in pre foreclosures. Pre foreclosure properties can be located by studying the public notices about properties in default. For more details please visit www.foreclosures.com