How to Buy a Home Before It Goes to the Sheriff Auction

A real estate agent who specializes in foreclosures is a good asset.

A real estate agent who specializes in foreclosures is a good asset.

Many people who were approved for a mortgage during the subprime-lending period, which occurred mostly between 1997 and 2006, began to default on their loans in record numbers beginning in 2006 and 2007. The glut of foreclosures on the market can be a good opportunity for home buyers. To buy a foreclosed property before it goes to the sheriff auction, you would buy during the pre-foreclosure stage.

Pre-Foreclosure or Short Sale

Pre-foreclosure occurs after the homeowner has missed several mortgage payments, and the lender files a public notice. Buying during this stage is a little tricky because the homeowner can still pay the lender what he owes to reinstate the mortgage. You would contact the homeowner directly or through a real estate agent during pre-foreclosure with an offer to buy the house. A short sale is another type of transaction that occurs when the bank allows the homeowner to sell the house for less than what he owes to avoid foreclosure.

Find a Real Estate Agent

Banks typically hire a real estate agent to handle their foreclosed properties, Memphis, Tennessee-based real estate investor Elaine Zimmerman told Find one by looking through foreclosures at real estate websites. Your goal should be to find a real estate broker, not a property. Once you develop a relationship with an agent who specializes in foreclosed properties, you might learn about the newest properties that have not yet been listed, which could reduce your competition in buying the property. Call the agent and tell her you are interested in buying a foreclosed property.

Know the Comps

Identify the prices that other homes have sold for within the past 90 days in the area in which you wish to buy a pre-foreclosure. This is especially important in high foreclosure areas where prices are likely to decline until the market hits bottom. Short sales traditionally were priced low, but this caused lengthy delays for the banks to approve the sale. As of 2012, short sale homes are priced higher to shorten the wait time. Therefore, you need to know the home’s value so you won’t overpay. Foreclosed homes are the same way. Banks sometimes price them low, but sometimes they price them too high, according to Zimmerman. Also, check to determine whether there are any liens on the property by contacting a title insurance company.

Get Financing

Show that you are serious and can act immediately to buy a home by obtaining pre-approval from a lender. Lenders pre-approve a certain loan amount by looking at your credit score, your income and your expenses. If you wait to find the house and then arrange financing, you might miss the deal. Foreclosures tend to sell quickly. Buying a foreclosure is unlike buying a car, where dealer financing is common. Providing financing for the sale of a house and selling a foreclosed property are two separate transactions. You are better off shopping for the best mortgage deal available and then approaching the lender that is selling the property.


About the Author

Laura Agadoni has been writing professionally since 1983. Her feature stories on area businesses, human interest and health and fitness appear in her local newspaper. She has also written and edited for a grassroots outreach effort and has been published in "Clean Eating" magazine and in "Dimensions" magazine, a CUNA Mutual publication. Agadoni has a Bachelor of Arts in communications from California State University-Fullerton.

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