The advantage to buying a property at a foreclosure auction is that you often time you pay far less than you would have under normal circumstances. Many times you can improve the properties and then sell the homes for a higher price than what you paid for.

But there are many risks and disadvantages. Simply to participate in the auction you must have sufficient funds available (either cash or a cashier’s check) to cover 10% of the purchase price. You also must be able to arrange for financing within 30-days to complete the purchase or you may lose your deposit. Next, you’re buying the property as-is, without inspection. The condition of the interior of the property is usually unknown. You’ll have to be certain that the price you pay is low enough that you can still afford to make significant improvements or repairs.

Buying at pre-foreclosure has two main advantages over buying at a foreclosure auction. The homeowner may be desperate and be willing to do almost anything to avoid foreclosure. remember foreclosure will be stated on his credit report and that is a very negative item that may affects the homeowners when he wants to purchase another home in the future. Most importantly, you can enter the property to inspect it before the purchase, so you’ll know exactly the conditions of the home. For those reasons, pre-foreclosure investing is a wave many real estate investors are now considering.

Pre-foreclosure process. Pre-foreclosure purchases are in many ways similar to a normal real estate purchase: you negotiate with the homeowner, sign a contract, and proceed with the transaction. The main difference is that instead of the homeowner listing the house for sale, you’re finding potential homeowners to buy their property.

You can easily find homeowners in the early stages of foreclosure by checking public notices. You can also go to the county clerk’s office and read the postings. A public notice in the newspaper will list the bank’s attorney. You can contact the lawyer to get the information on the property.

You can also contact the bank that originally made the loan and talk to someone in the bank’s delinquent mortgage department.

You can also contact the homeowner directly to attempt to purchase the property. Keep in mind that it is very likely that the homeowner has already been contacted by other real estate agents and investors. If you’re interested in buying the home to live in, you may have a better chance because homeowners in financial difficulty are likely to feel uneasy with investors and agents who are just there to get a deal out of someone's distress. You may find a homeowner willing to sell their home at a bargain price.

Your main challenge is identifying all the possible obstacles to purchasing the property to be foreclosed. The homeowners can possibly have other judgments against them. They may not be honest and straightforward in their dealings with you, a great reason why you should always use an attorney to help you with any real estate transaction as such.

The benefit can be huge. Buying pre-foreclosure properties can be a great way to obtain properties at bargain prices, and with a distinct advantage over buying auction properties: You can fully inspect pre-foreclosure properties. Remember, the biggest unknown involved in buying auction property is the condition of the property since you can’t inspect it before purchase, you have absolutely no idea what it looks like inside and in some cases you’ll be in for a bad surprise after you’ve purchased the property. You should seriously consider that issue when buying foreclosed properties.

When you buy a pre-foreclosure property you can inspect the home, and if necessary bring a contractor in to provide an estimate,  of the total cost involved in improving or refurbishing, rehabbing the property. Investors who purchase properties at the pre-foreclosure stage can make an educated assessment of the investment potential.

To Your Success,