The foreclosure unit is attractive to all real estate investors. The foreclosure market can present a promising future, and knowing the right stage to buy at will help you get make the most of your investment. Each stage will offer a different type of potential for your investment portfolio.

Pre-foreclosures are known as short sales in the real estate world. This is likely the most advantageous stage for investors because lenders are willing to work out better deals. This stage occurs after the borrower has missed mortgage payments, but before the home goes to an auction sale. Actually there are two stages of a short sale. The first is when the home owner defaults on his mortgage, or is more than 30 days late on his payment. The second part is when the home owner actually receives a legal letter known as a Notice of Default.

As a property investor, you want to find sellers who have actually received a Notice of Default on their mortgage because they are more than three months behind on payments and will likely work with you on a purchase. Before they receive this notice, sellers have ample opportunity to catch up their payments and cure their loans.

The foreclosure stage begins after the home owner receives a notice of default and the lender takes legal action against them. Unfortunately, they will be evicted from the home and the property will be seized. When this happens, the lender must place the property up for the trustee sale or foreclosure auction. 

Next time our conversation continues, we will take a look at post foreclosure and how that affects the process an investor must follow.


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