Today hundreds if not thousands of foreclosures go to market every month. This is a lucrative business for smart investors. You can invest in a property that may double in value in a few years when the market turns around. Let’s learn more about investing.

Pre-Foreclosure Investing

Foreclosure usually happens when property owners fail to make their mortgage payments on time. This is a gradual process that usually occurs over several months. Lenders often foreclose on a property to recover the debts owed to them by the borrower. When the lender forecloses they repossess the property so they can resell it.

This process usually takes a lot of time. The homeowner still owns their property however until the public auction takes place to sell it. Any time before the public auction takes place a pre-foreclosure sale can happen. The investor does the following:

1. The investor first invests in the property by buying the property from the seller at a discount, usually below market value. This works if the owner has equity.
2. The investor can take over and make up all the back payments. This stops the foreclosure in a “subject to” arrangement”.
3. Trying to invest in a short sale where the lender agrees to take a lesser amount to sell the property than what is currently owed.

Short sales are often a great way to buy a pre-foreclosure home and make a handsome investment when you can negotiate with a bank and purchase a home for less than the loan amount. This tends to work out for both the investor and homeowner, and eventually for the original lender too if you can convince them to see this in your favor.

Many lenders may initially oppose such maneuvers but seeing the housing market decline will often encourage lenders to seek out a compromise or discount purchase rather than lose a lot of money in a lengthy foreclosure. This is really a win-win situation for all parties involved.