When a home loan is not re-paid according to a mortgage agreement the bank will announce its intention to foreclose on the property and will usually still give the homeowner a period of grace called a pre-foreclosure. In this period the property owner can still make payments to reverse the foreclosure or can sell it to avoid foreclosure.
Pre-foreclosure is not a great position to be in for the homeowner but it still gives a chance to reinstate the loan by paying off the default portion or to sell off the home at a public auction to avoid losing the investment completely. Pre-foreclosed homes often sell easily since they can be bought for below market prices. As the owner, the home is still yours until foreclosure and you should take this opportunity to recoup as much of your investment as possible.
For the investor, Honolulu pre-foreclosed homes offer big opportunities to buy property at low prices. Buying the home is good for you as an investor and also good for the homeowner who has few or no other options. Homeowners typically put years of investment into their homes and are willing to sell below value rather than risk losing everything that they have worked for and also incurring a bad credit rating through foreclosure.
By buying the home from an at-risk owner, you’re helping him or her to retain some of the home’s equity and also avoid becoming a credit risk. Pre-foreclosures can be excellent investments as properties can be bought well below value and then re-sold for high returns, but be aware that there is also a lot of competition for these investments. It’s important to be able to compete by offering something that other investors can’t, like a better price or a speedier deal.
You’ll need to get into direct contact with the homeowner in person, by phone, or email. If you can track down owners you can let them know of your intent to buy the property and how this will help them regain equity from their home and especially help their credit rating. You can even help to pay off outstanding bills with your quick purchase. Let the owner know that though you’re looking for a good deal, you’re also there to help them as much as possible out of a bad situation.
On the phone be sure to be kind and patient and not to be forceful or aggressive as they will already feel vulnerable due to the imminent loss of their home. Ask for a personal meeting and treat them like business partners, calmly explaining your intentions and also discovering their needs.
Finally, you’ll need to look at their mortgage papers and look carefully for any liens or second loans on the property. Also inspect the home before you buy, to make sure that it will be re-sellable after you buy it. The whole procedure of buying pre-foreclosed properties can take a lot of time, patience, and research to make sure that you getting good properties, but these can also be excellent investments with potentially high returns.