Investment Strategies 6 Ways to Find Pre Foreclosure Homes in 2022 by Rexter Marqueses March 3, 2022March 3, 2022 by Rexter Marqueses March 3, 2022March 3, 2022 Smart investors look for pre foreclosure homes to make a quick profit. Here’s how you can pull this off. Most successful real estate investors take pains to discover means to optimize their profits. The more savvy ones have unearthed the brilliance of using off market properties as investment vehicles. They have adopted the option of scouring through pre foreclosure homes listings as a part of their roster of real estate investment strategies. Pre foreclosure homes attract many investors because of the low purchase price and the immediate returns. However, if you focus only on finding a house sold at a bargain, you may end up with a dismal yield. You need to have adequate knowledge on where to find the right property and the striking features that will make it attractive to the market whether you rent it out or sell it. You should also have the insight to determine if the pre foreclosure is caused by an unfortunate circumstance of the owner or something that may be bigger in scope and has influenced the real estate market. Pre foreclosure investing has its intricacies, making experts believe that this strategy is not for amateur investors. However, the lack of experience should not deter you from trying this out for the first time. To equip you with the right knowledge and tools for your pre foreclosure home hunting, we’ve put together the following blog post to explain the following: What pre foreclosure homes are The benefits of investing in pre foreclosure homes Where and how to find home in pre foreclosure How to buy pre foreclosure homes What Are Pre Foreclosure Homes? Pre foreclosure homes are residential properties in the initial stage of home repossession, meaning the properties’ owners have defaulted. In this stage, the lending party has filed a Notice of Default on the property to notify the borrower that they are taking legal action to foreclose the property. A lender may allow a borrower to negotiate to avoid foreclosure, but typically, a borrower who has defaulted has two options: Pay the debt to reverse the process Offload the property before it is repossessed Sharp-witted investors would see the second option as an excellent opportunity to acquire an investment property. Advantages of Buying a Pre-Foreclosure Home Why would experienced real estate investors show a keen interest in pre-foreclosure homes? Several advantages are offered by buying pre-foreclosure homes, including: Low purchase price. The property owner is running against time and would feel compelled to sell even at a bargain price of up to 50% below the market value, which means that if you decide to sell it, you will also gain a significant profit. Quick closing process. Again, because of the time element, the seller of a pre foreclosed property would tend to accelerate the sales process. Low investment risk. Suppose the pre-foreclosure property is situated in a neighborhood favorable for real estate investment. The value of the property you have set your sights on is most likely to appreciate significantly over time. What’s even better is you can acquire it without any collateral. Higher probability of a good return on investment. Many pre foreclosure properties had undergone repairs and renovations before they faced the risk of repossession, which means you don’t need to spend too much on repairs. Despite being pre-foreclosed, the property’s value will still increase so you can still enjoy a decent profit. How to Find Pre Foreclosure Homes for Sale Finding pre-foreclosure homes for sale may not be a walk in the park, but it’s not a Herculean task either. After all, there is a wide range of methods and an abundance of real estate investment tools for identifying distressed properties for sale. Below are some of the ways of finding pre-foreclosure homes for sale. Related: The Ultimate Investment Property Search Tool 1. Search Through Public Records Off market properties for sale are found on public records. Aside from easy access, the records are free to anyone who would like to search for data from them. You can even hire someone to do it for you. But what data should you look for? The public records should have the following information: Notice of Default letters issued within the neighborhood Lis Pendens, an official document notifying the public that a lawsuit concerning a claim on the property has been filed Notice of Sales Name and address of the owner The amount owed on the property One advantage of using this method is ensuring that the information you find is up-to-date. Unfortunately, public records have limitations, too. You will not see the property’s description or photos on the public records. But you will have less competition because there are not as many investors who use this method as those who go to websites or team up with real estate agents. When you go into this method, you must be prepared for the tedious process of searching through all the data, and if your county has not invested in technology, you may have to visit your county’s courthouse to retrieve the information you need. This approach is ideal for seasoned investors with the time and the patience to comb through public records and the knowledge to locate and identify a good-for-profit pre foreclosure property. 2. Seek the Services of a Real Estate Agent While there are many real estate agents you can tap to assist you, you would want to work with someone knowledgeable on pre-foreclosed homes and the property repossession process to avoid costly mistakes. However, if you are a seasoned investor with sufficient knowledge of this real investment strategy, the level of experience of the real estate agent you work alongside may not be relevant. They will still help, though, because they have better access to information beyond what you can find in the public records. For instance, the Multiple Listing Service (MLS), a local database of properties for sale, is only available to real estate professionals. Aside from access to real estate information, real estate agents can filter the MLS search so that they will only provide you with pre foreclosure listings. When you choose this method, the real estate agent you picked will not only help you find the right property. They will also take care of setting appointments, negotiating offers, and other relevant work on your behalf. However, this option presents two drawbacks. First, you are dependent on the real estate agent’s availability, and if you want quicker action, this dependence on the agent will be a hiccup in your endeavor. Second, the property’s price may significantly increase when the real estate agent’s commission is added to it. 3. Tap Into Your Real Estate Network Of course, if you are a first-time investor, you may not have a wide network yet. But that’s alright. If the people in your network are not well-versed on pre foreclosure investment either, you can ask them — no matter how few they are — to connect you to people who can help you locate a good pre foreclosure property. This approach may not be the best option for a novice investor because, depending on your network’s expertise, it might take more time for you to find the best pre foreclosure home, and we know how critical timing is in real estate. Likewise, patching you through their network may not be as successful. With that said, this approach will work best for seasoned investors who have expanded their real estate network over the years. 4. Use Your Local Newspapers Really? At this day and age? Well, old-fashion as it may seem, the legal notice section of newspapers can show you where to look for pre foreclosure homes as it provides a list of properties that will be included in an auction. You will find the list on the real estate classified ads or under the heading “Investment Properties.” Visit these sections at least once per week so you can monitor those properties that have been posted for weeks – owners of those properties are more likely in a hurry to sell the property even at a much lower price. The only downside to this approach is the newspaper’s lack of details. It also does not show any photo or description of the property, so you need to research. You still need to gather additional information about the income property and the homeowner. If you are truly opposed to the newspaper in printed form, you can always search the online edition with the same information. What’s nice about referring to newspapers is the ease of access, print or online. The other benefit is the updated information you will get from this source. Also, because not many people would think of using the newspaper as a reference, that would mean less competition with the property. This method is ideal for experienced house flippers who know what to look for in a property and ask the right questions to the homeowner. 5. Get in Touch With Real Estate Wholesalers A real estate wholesaler finds distressed houses for sale, contracts them with the owner or seller, then finds a buyer for them at a higher price than that of the seller. Unlike the house flipper, a real estate wholesaler does not do any repair or renovations to the distressed property. Since wholesalers are experienced real estate professionals, it is not just the pre foreclosure listing they can provide you with. They may be helpful to you if you decide to fix and flip the property. You may also learn something from them about real estate investing. However, you may have to pay a wholesaler a referral fee for giving you the leads, even if you still have to research the property. Now, where to find these wholesalers? Join an association for real estate investors or ask a real estate agent to refer you to one. If you are a first-time investor, do not rely on this approach. Aside from the research that you need to do, wholesalers prefer to refer experienced real estate investors. 6. Explore Real Estate Websites When you type “pre foreclosure homes near me” on the search bar, your search will lead you to several websites offering access to pre foreclosure listings. But which of these websites should you pick and rely on? The most comprehensive among these websites is Mashvisor which offers several real estate investment tools. One of these tools is the Mashvisor Property Marketplace, which contains listings of various properties ranging from pre- foreclosure homes to tenant-occupied rentals. You will find in the next section how Mashvisor’s tools can help you with your investment project. This approach is best for real estate investors hunting for pre- foreclosure listings. The listings will allow you to narrow down your choices, so you save on time, effort, and money scouting around for the best pre-foreclosed property. Although most of the methods listed above cater more to experienced real estate investors, it doesn’t mean first-time investors should not try them out. In fact, you can use one or a combination of these methods. Related: 7 Real Estate Investor Websites to Use How Mashvisor’s Tools Can Help with Your Investment Property Analysis Earlier, we mentioned that Mashvisor has the most comprehensive listings of properties for sale. But apart from those listings, you can also use its other real estate investment tools to help you decide if a property is a worthwhile investment. The Mashvisor Property Marketplace is a tool that takes care of your pre-foreclosure investment from the cradle to the grave. It helps you find the pre-foreclosure property, analyzes its income potential for you, leads you to the homeowner, and put your property on the list when you are ready to sell. For the purposes of this blog, we will limit the discussion of the Mashvisor Property Marketplace to finding the property and estimating its potential returns. Find an Investment Property This tool enables you to find off market properties easily and efficiently, as it provides you with access to a vast database of non-MLS properties, including auctioned homes, foreclosed homes, bank-owned homes, short-sales, and tenant-occupied rentals. You can set filters according to your preferences, so you narrow down the search based on your criteria, which include the following: Location (you can do a simultaneous search up to 5 cities) Miles (how far you want the property to be away from the city) Budget (how much you are willing to pay for the property) Rental strategy (Traditional or Airbnb) Property type (Single-family residential, Off market multifamily, Condo/coop, Townhouse, etc.) Listing type (non-MLS, foreclosure, needs repairs, tenant-occupied) Number of bedrooms (specify from 1 to 5) Number of bathrooms (specify from 1 to 5) Desired cash on cash return Desired cap rate The list your search produces is arranged in descending order of each property’s potential return on investment. What’s more, it has the property’s photo. Use Mashvisor’s Property Finder tool to find off market properties easily and efficiently based on your set criteria. Evaluate Investment Potential When we say Mashvisor is the most comprehensive real estate website, it is because it does so much more than just provide you with a list of pre foreclosure homes. It also presents you with an analysis of the income potential of these properties, making it easier for you to select a property. You may analyze the income potential of the properties in your shortlist using Mashvisor’s Investment Property Calculator. You may click on one of the listings or enter the address of a particular property to start the analysis. The analysis will give you an estimate of the following metrics: Property price One-time startup costs Recurring monthly expenses Traditional and Airbnb rental income Traditional and Airbnb occupancy rate Traditional and Airbnb cash flow Traditional and Airbnb cash on cash return Traditional and Airbnb cap rate The estimates provided by Mashvisor are accurate because the data are obtained from reputable sources such as Airbnb, MLS, Realtor.com, Roofstock, and Zillow. Related: How to Find Cap Rate for a Real Estate Market How to Buy Pre Foreclosure Homes You have selected the property you would like to invest in. The next logical step is to purchase the property. Here are some tips when buying a pre-foreclosed property: Check if the homeowner’s problem has been resolved. It’s possible that from the time the property was listed, the homeowner has settled their debts with the lender, reversing the pre foreclosure status. Ask for assistance from a real estate professional specializing in foreclosures. Validate the numbers. Although Mashvisor’s data are reliable, it won’t hurt to validate the numbers. Check the total loan values, property value or selling price, estimated purchase and repair costs. You can better negotiate a good price for the property when you have these values. Express your interest in purchasing. Exercise diplomacy when talking to the homeowner. Persuade them to allow you to tour the property to determine the amount of repair needed. Negotiate if you must. Make the purchase official. Find a real estate lawyer to help make the purchase agreement binding and fair to both parties. Let a real estate agent or a lender begin the escrow process. The Bottomline Pre foreclosure homes are another way of investing in real estate, and it is a strategy that savvy investors apply. The processes involved in this real estate investment strategy are more complex than most other strategies because of the challenge of finding a pre foreclosed property, the legalities involved, and the sensitivity required in dealing with the property owner. However, these challenges should not deter first-time investors from venturing into pre foreclosure home investing. We have provided you with basic knowledge, but you must be willing to learn the ropes and work hard to succeed. Mashvisor has even provided you with the tools to facilitate your entry into pre-foreclosed property investment. If you want to get started, schedule a demo with us, or sign up for a 7-day free trial of Mashvisor today. Start Your Investment Property Search! START FREE TRIAL ForeclosuresInvestment Property AnalysisProperty FinderProperty MarketplaceProperty SearchReal Estate Education 0 FacebookTwitterGoogle +PinterestLinkedin Rexter Marqueses Rex has been working as a freelance writer since 2019. He writes about business, finance, and real estate. He's currently a full-time writer at Mashvisor and is committed to helping investors navigate the US market with confidence Previous Post Home prices up by 18.5% in December 2021, According to Corelogic Next Post 5 PropStream Alternatives Real Estate Investors Should Consider Related Posts Pros and Cons of 5 Different Types of Residential Properties Why do new investors fail at real estate wholesaling? How to Flip Houses with the Help of Mashvisor A Guide to House Hacking with a Fourplex Real Estate Wholesaling: Step by Step How to Invest 200k in Real Estate for a High ROI What Is the Best Property Investment for Beginners? The Best Short Term Investments in Real Estate The Difference Between an Airbnb and Traditional Investment Property The Top 10 Advantages of Investing in Real estate A Beginner’s Guide to Real Estate Note Investing How to Invest in Real Estate in Your 20’s Leave a Comment Cancel Reply Save my name, email, and website in this browser for the next time I comment.