What is the difference between pre-foreclosure and foreclosure? — FIbyREI

What is the difference between pre-foreclosure and foreclosure?

First things first, it’s important to understand what a foreclosure property is. Let’s say a borrower took out a mortgage for their home purchase. Unfortunately, they were unable to keep up with the mortgage payments. After a certain amount of time, the lender will have the right to foreclose on the property. At that point, the lender will own the home. Typically, lenders sell foreclosed properties through an auction setting.

How many months does it take for a house to go from pre-foreclosure to foreclosure?

When a homeowner misses three months of mortgage payments, or is 90 days late on their loan, the loan will go into default. At this point, the home will be considered a pre-foreclosure.

How does pre-foreclosure work?

The pre-foreclosure process is started when a borrower is unable to keep up with their mortgage payments. Typically, a homeowner that is 90 days late on their mortgage will be in pre-foreclosure status.

  • Find a way to catch up on their payments.
  • Look for a buyer who can save them from impending foreclosure.
  • Wait for the completion of the foreclosure process.

Pre-foreclosure vs. short sale

If you are looking into pre-foreclosure options, you may run into the term short sale.

Can You Profit by Buying a Pre-foreclosure Home?

A real estate investor can potentially profit from buying pre-foreclosure homes. Of course, not every pre-foreclosure home will result in a profit for the investor. As with all potential properties, you’ll need to run the numbers of the specific deal to ensure you can make a profit.

Is it bad to buy a pre-foreclosure home?

Like all things in real estate, it is not necessarily bad to buy a pre-foreclosure home. However, you’ll need to decide for yourself if an individual property is a good option for you.

Benefits to buying pre-foreclosure or foreclosure

The major benefit of buying a pre-foreclosure or foreclosure is the potential profits. Although not every pre-foreclosure or foreclosure is a good deal, many offer a profitable return on your investment.

How to find pre-foreclosures and foreclosures

If you’ve decided that you want to pursue pre-foreclosures and foreclosures, you’ll need to know where to look. Typically, pre-foreclosure homes are off-market properties that are not listed anywhere. Although there are some great deals to be found, it can be a challenge to find these deals.

How to negotiate a pre-foreclosure

Once you’ve found a deal, you can negotiate with the homeowner. Typically, homeowners in distress are more willing to negotiate.

The bottom line

A pre-foreclosure could be a good opportunity for a real estate investor. Although the details of a particular property will determine if it is a good deal or not, you may be able to find some great deals among pre-foreclosures. In order to find those deals, you’ll likely need to do quite a bit of legwork.

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Host of “The House Hacking Podcast” and owner of www.FIbyREI.com

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Andrew Kerr

Andrew Kerr

Host of “The House Hacking Podcast” and owner of www.FIbyREI.com