Purchasing Pre-foreclosure Property

If done properly, purchasing a pre-foreclosure property, locating and purchasing a property in a distressed or defaulted mortgage prior to the bank actually foreclosing, can result in finding a great property below the fair market value. Locating pre-foreclosure properties may be time consuming because often these properties are not listed for sale. There are a variety of websites that provide lists of “pre-foreclosure” properties, some for sale and some not. Be cautious however, as most of these websites require you to pay for the listings and may sometimes contain outdated or erroneous information. There are also a growing number of Realtors who now specialize in pre-foreclosure properties and these real estate professionals can be an invaluable asset in locating and obtaining pre-foreclosure properties.

Locating Pre-foreclosure Properties

One method of locating pre-foreclosure properties not currently listed for sale is to monitor any notice of mortgage default, notice of acceleration of note, and notice of trustee sale (foreclosure) postings at the county courthouse. Lenders are not required post the notice of mortgage default or notice of acceleration of note, but are required, under the Texas Property Code, to post the notice of trustee sale (foreclosure) at the county courthouse. Posting of a notice of mortgage default or notice of acceleration of note is an indication that the mortgage is “in distress” or in default and may mean that the property owner is willing to sell the home rather than face a foreclosure and the potential accompanying damages to his or her credit. Approaching the property owner with an offer to purchase, however, may be a sensitive topic especially if the property is not being listed for sale. On the other hand, some owners may be relieved at the opportunity to get from under a defaulting mortgage and may jump at the chance to sell.

Buyer’s Due Diligence

Once a purchase of the property has been approved by the lender, the remaining closing process is similar to a normal property purchase. Accordingly, the buyer should exercise the same due diligence as required in purchasing any real estate to ensure that they are sufficiently protected in the purchase. These steps include:

• Having your attorney review the sales contract to ensure that you are adequately shielded from liability during the sale;
• Having your attorney verify that the seller is not currently in and does not plan to file bankruptcy prior to the sale;
• Utilizing a title company to perform a thorough title search and issue a title policy to Buyer after closing;
• Having the property thoroughly inspected by a licensed and qualified real estate inspector and discussing any issues that the inspector finds or that concern you; and
• Having the property appraised by a qualified real estate appraiser.

As with purchasing any property, buy a pre-foreclosure property involves some risk, but understanding those risks and utilizing the services of qualified professionals including an attorney, realtor, title company, inspector and appraiser as well as thoroughly understanding the purchasing process can help minimize this risk.

Eric R. Thiergood, Sr.

Phone Number: 281-367-1222

Fax Number: 281-210-1361

[email protected]