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5 Best Stages Of Foreclosure To Make An Offer To Buy
Which type that a state practices depend on whether the state secures real estate loans by a mortgage or deed of trust.
As there are various stages in the foreclosure process, each playing a crucial role in the grand scheme of things, moments of opportunities can arise throughout the whole process that present real estate investors to acquire a foreclosed property either at very attractive prices or attractive terms.
It is for this very reason that many investors primarily do their rental property shopping in the foreclosure market. The prospect of a killer deal presenting itself will be too painful to miss out on.
Everything else is secondary.
Here are the best times to buy.
Preforeclosure is probably the preferred time to buy for most investors familiar with this market.
Firstly because if you do your research well, there will be the least amount of competition at this stage.
Lesser competing investors means a lesser likelihood that the homeowner’s head would be turned by other offers.
It also give an investor a chance of building real rapport which can play a critical part in agreeing a deal.
When a homeowner is comfortable with you, he might reveal his real problems… which you might be able to easily solve.
Secondly, the homeowner would usually owe less in back payments.
An investor might be able to acquire the property by settling the outstanding amount and committing to repay the monthly payments.
This gives the homeowner a quick exit without having his credit hammered.
What’s even better is that from such an arrangement, will technically not be taking up any new debt under his own name.
Thirdly, there is a lot more time to explore an exit strategy since the foreclosure process has yet to commence.
Flippers might be able to flip the property even before the foreclosure actually starts. Making it redundant.
2) After official notice and prior to sale
The reason why this little window of time is a favorable time to make a offer to buy is because this is the reinstatement period which the homeowner has a right to activate.
If a loan is reinstated, everything will fall back into place as if the delinquency never took place.
This is done by making up the back payments, and then meeting the monthly obligations as it was before these events took place.
The good thing about this phase is that the investor can find leverage from the existing loan.
However, because the official notice has been served, there are going to be other investors competing for the property this time.
3) After the sale
Property investors who buy at the auction actually get more nervous about the period after the auction than at the auction itself.
This is because this is a time when the redemption rights linger.
You can in theory negotiate a deal with the owner, acquire the rights and trigger the right to redemption.
However, a better move will be to buy from the bank directly.
When no one is interested in the property at the auction, the lender will acquire the property for the amount that is owed.
It is now real estate owned (REO).
Because lenders are in the financial business rather than the real estate business, they could let go of a property as soon as a fair offer comes in.
From their perspective, and at this stage, fair refers to the lender getting their money back. It has no reference to market value.
This gives you the chance to buy them very cheaply.
A great feature of this stage of foreclosure is that most investors, especially newbies, see the end of an auction as the final opportunity to buy.
So there is less competition at this stage than the previous one mentioned.
4) Days leading up to sale
There is nothing special about this phase of the process except that it’s often within this period when reality starts to sink in with the homeowner.
He simply realizes that it’s really happening and that action needs to be taken.
By getting involved, you might still be able to strike a deal for a short sale.
But be mindful that at this stage, there is no luxury of time as everything starts to happen fast.
Many people think that the auction is the only place for them to put in an offer for a foreclosed home.
But it is not the best time to make your offer to buy.
Firstly because winning an auction requires the buyer to pay in cash or certified funds.
This means that unless you are laden with cash or a sugar daddy, you are not going to get anywhere.
Secondly, emotions in auctions can cause you to make bad decisions no matter how well you have strategized your bidding.
Thirdly, you can’t back out of the deal should you find that the house is in seriously bad condition after inspecting it.
However, it can be a good opportunity to buy if… you turn out to be the only bidder.
Going through all these opportunistic stages to buy, the general rule is that it tends to be best to buy as early into foreclosure as possible.
You have more time and less competition.