Key Advantages Of Investing In Pre-Foreclosures

Investing in pre-foreclosure properties has a number of advantages and has been proven time and time again to be a great option for many investors. For starters, you can typically get a large discount on the retail value of a home in pre-foreclosure. A lender may also agree to a "short sale" where you get to buy a pre-foreclosure home for less than the mortgage on the property. Many lenders will prefer this than foreclosing the home, which they may not be able to sell for at least the amount of the mortgage anyway.

Another reason why pre-foreclosures make for great investments is the flexibility they offer in terms of financing. For example, you may be able to take over the financing that's already in place. Through a "subject to" financing arrangement, you get the deed to the property in return for paying off the home owners loan. Your credit history plays little or no role in qualifying you for such an arrangement, while you get the property title, continue paying off the existing mortgage, and also obtain the advantage of any available tax benefits and capital appreciation of the property.

Because the pre-foreclosure market is somewhat regulated; with home owners, lenders and investors all having to abide by specific rules governing the foreclosure process, the market is also somewhat exclusive to those "in the know". Even though becoming familiar with the various rules is not difficult, it's still enough to deter a lot of investors from getting involved in this area of the market. That's great news for you, as it means less competition from other investors.

Finally, buying a home in pre-foreclosure is often better than buying one that has been foreclosed and is being offered for purchase at a trustee sale or public auction.

For one thing, you may not be able to inspect a foreclosed home prior to bidding. Plus, many investors find auctions rather fierce and intimidating. And once you have successfully acquired a property at auction you must typically make a large payment up-front, with the full purchase price due within a matter of days. Pre-foreclosures, on the other hand, have none of these disadvantages; you can inspect the home and properly appraise its value, you avoid the high pressure environment of an auction, and you rarely need to pay the total payment for the home within just days of purchase.

As you can see, investing in pre-foreclosures provides a number of advantages. What's more, you are also able to assist a desperate home owner out of their predicament, and help save their financial standing.

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