Due to the recent real estate collapse, many people across the United States are losing their homes to foreclosure. The period of time before the official foreclosure is called pre-foreclosure. Depending on the state the pre-foreclosure period lasts from seven days to a 60 days. Real estate experts know that the pre-foreclosure period is a great time to purchase a home.
Many of the ‘for sale by owner’ signs that you see are from owners that are in pre-foreclosure. The bank usually allows the homeowner time in which to try and sell their home before it is foreclosed. This is common because the bank is not in the real estate business and would prefer the current owner sell the home to cut their losses rather then having to seize the home themselves.
Here are many advantages to buying a pre-foreclosed home from a homeowner rather than bidding on a foreclosed home at an auction:
- Pre-foreclosed homes are often sold for less than foreclosed homes. To avoid credit problems a homeowner is motivated to sell their home before the bank takes possession.
- Since you won’t be at an auction, you will be given more time to talk to the home owner about any questions you may have concerning the house.
- There is usually less competition for a pre-foreclosed home than a auctioned foreclosed home. You won’t have to worry about placing the highest bid.
- More time to consider your finances before making the decision to purchase a home.
- Auctions can be a skill in itself and many people are not comfortable in that environment.
- You can bring an inspector along with you to inspect a pre-foreclosed home.
- You don’t need as much cash up front like you would at an auction. You can pay a down payment for as low as a few hundred dollars!
As with any house purchase make sure you check for any judgments, or liens against the estate. Bring along someone how is familiar with buying real estate and if possible have the house professional inspected. The risks are comparable to a traditional type of home purchase but with the advantages of foreclosure discounted pricing.
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