Foreclosures, Preforeclosures

First, it is important to note that there is no appreciable difference in foreclosure investing compared to investing in any other real estate. "Foreclosure" is not a method of investing - it is a type of motivation. With the exception of using a Short Sale, the actual methods used in foreclosures are identical to methods used for any other property.

The only difference lies in where you locate the sellers. In other real estate, sellers are found in the MLS or classifieds. In foreclosures, probates and bankruptcies, sellers are found in the legal notices at the courthouse and in the newspapers. That is the only difference. Do not buy into some late-night "gurus" spiel just because he tries to convince you there is something special about foreclosures that only he can teach you. It simply is not true.

Most "gurus" who profess knowledge of foreclosures and preforeclosures often do not know the difference. But there is a vast difference, and it can make all the difference between success and failure.

A true preforeclosure is a property owned by a seller in distress, who has failed to meet his mortgage obligations, and his lender is ready to file foreclosure but has not yet done so. At this point, the owner still has some flexibility, and some options, so if you can reach him at this point, the chances of success for both of you is great. But because no papers have yet been filed, you will not find these motivated sellers on any "list", as many of those gurus would have you believe. So, you will need to learn how to find these sellers. So, look for a program (like this one ) that specifically tells you how to find these preforeclosures before they get on any list.

If you wait (as other programs have you do) until the foreclosure papers have been filed, the owner's options have narrowed substantially. Furthermore, at this point he will either be in denial, or angry, neither of which is conducive to a successful outcome. Once a lender files notice of foreclosure and the owner is put on a "list", he will soon be bombarded with ridiculous low-ball offers from hundreds of investors. This will anger him, and will likely prevent you from even being able to present an offer. Needless to say, if you can get there before the bank files (lis pendis) and before the owner gets on a list, your chances of success are greatly enhanced.

Because there will be times when preforeclosures are not plentiful - but you still need to make a living - you will want to also learn about FORECLOSURES, themselves. A different kettle of fish, altogether. In a true foreclosure, the bank has already foreclosed (filed notice), and an auction of the property is scheduled. If no one bids higher than the foreclosing bank, the bank gets the property and it is then an "REO" - Real Estate Owned. The bank then lists the property with a Realtor, and normally sets an asking price near market value. Even though the foreclosure has already completed, many people still call this a foreclosure, even though it stopped being a foreclosure once the auction ended.

Foreclosures, unfortunately, normally require cash deposits at the auction, with the balance due in 30 or 60 days, although "The Simple Man's Guide to Real Estate" does show you how to get around this. And if you make offers on REO's (bank owned), do not count on being able to use any creative methods - banks are rarely motivated or flexible. But there are still ways to profit from them. More important, there are methods of investing in foreclosures that do not require the use of either cash or credit.

A good real estate investing program will detail how to take advantage of foreclosures. More important, it will teach you what to look out for - the last thing an investor needs is a nasty, costly surprise that could easily have been avoided.