Buying Pre-foreclosures - The Psychology of Win-Win

If you are an investor than you probably know that giving some time to pre-foreclosures is a way to make a great deal under market.  Having a thorough understanding of how sellers get to pre-foreclosure and what is involved in the deal is the best way to negotiate a profitable purchase for you and your team.

Pre-foreclosure is the first stage of a home being foreclosed

This happens when the home owner has missed at least one payment and is now considered delinquent on the loan.  The home owner will then receive a Notice of Default, which is a formal warning.  The homeowner will be given a certain period to respond to the borrower regarding the solutions of the un-paid payment/loan. In this state, foreclosure home owners are considered to be very motivated to look for home buyers to buy their house.

It is essential to understand the psychology of this type of transaction.  In most cases, the owners are dealing with negative events in their lives that have caused them to fall behind in mortgage payments. It could be an outcome of several things up to and including illness, job loss and divorce. Therefore, pre-foreclosure home owners are very distressed typically. This is important to keep in mind.  There is opportunity, but it bears in mind to be sensitive to the seller.

Being tuned in to the seller experience is win-win for 2 reasons. One, the seller will be more likely to work with a buyer who is aware of the circumstances and can speak to the situation. This may sound too touchy-feely for investors who are ready to hit the ground running and have the numbers in mind.

However, the other reason this is important to your negotiation is it will be much smoother.  You are more likely to get what you are asking for and keep the seller somewhat pleased with an already ugly situation.  You get a great deal and the seller can trust in the deal.  Keep in mind - sellers in pre-foreclosure status are used to getting offers from everyone and anyone willing to look at a pre-foreclosure listing. If you stand out then you may be the one that snags the deal.

The great win at the end of a pre-foreclosure purchase and sale is that you can buy some incredible properties well under market.  You can help a seller's bottom line and get your foot in the investing world all in one deal.  Not to shabby.