Preforeclosures are properties before they foreclose. Real Estate Investors that get the great deals on foreclosures houses purchase preforeclosure houses. A pre-foreclosuer is a property in distress, that will foreclose unless something is done to bring the mortgage loan current. There are three main stages of preforeclosure properties:
Loan in Distress
Notice of Default – Purchasing “Short Sales”
Notice of Trustees Sale or Foreclosure Auction
Foreclosure really begins when borrowers are in financial distress, and miss a mortgage payment. Banks won’t usually do anything until several payments have been missed, but technically can begin the foreclosure process as soon as the due date is missed. This is the earliest stage of the foreclosure process and can only be identified by personal knowledge of distressed borrowers, referral’s, or possibly insider information from a bank. Some times homeowners will realize their financial distress and attempt to sell these houses. They are usually hard to identify at this point unless the borrower owes more than the house is worth and must sell it as a Short Sale.
Short Sale Houses
In a Short Sale, the bank forgives a portion of the debt so it can sell rather than foreclose. When a house is in short sale status, the borrowers often try to sell these houses for sale by owner because they realize they have no equity, and can’t afford to pay a Real Estate commission. Smart sellers in distress realize they need a Realtors help. Especially a realtor who specializes in Short Sales and foreclosure homes. Houses listed by realtors and on the MLS are usually identified as “short sale” houses. These properties are sold as is, and usually have comments like “motivated seller.”
Are banks eager to do short sales?
A. No, and most of the people you’ll talk too are not that motivated to get things done. But a bank would much rather do a short sale than let the property foreclose in most circumstances. When speaking to banks to discuss short sale possibilities make sure you speak to the loss mitigation department.
How low below the amount owed will banks go for short sells?
A. It depends. A lot of the times banks won’t budge, but in some instances they’ll go up to 30% below amount owed to get the property off their books. In most instances you’re doing good if you can get them down 10%. Depending on how many loans are on the property the primary lender usually won’t go down at all until the junior liens take a cut first.