3 Stages to buying Pre-forclosures

This is a 3 part article on the stages of buying foreclosures. There are 3 stages to buying pre-foreclosures. These three stages, analyzing, hunting and convincing, are accomplished for the purpose of achieving one goal. That goal is to find an owner with sufficient equity, who is willing to sell his property before the auction and convince him to sell. Even those most dedicated to their task will may not be able to purchase every property analyzed for the auction. As disappointing as this is to one who has arduously toiled to come home victorious, it must be remembered that success is not achieved by processes of certainty. To be successful calculated risks have to be tolerated. The objective is not to buy every property analyzed but to buy enough properties to make the venture profitable. If enough time is spent you will be successful in the purchase of not one but several properties by this method. It is important to note that the 3 stages we are talking about today are for investors who wish to purchase a property for the long term or resale it for a profit. These stages could be used for short sales or loan modification programs with a few adjustments, but we will not specifically address those in this article.

Analyzing

The properties at the auction will not all be bargains. In fact, many will not be worth the time required to inspect them. Your objective is to discard these low value properties quickly. This can be done only with the aid of a quick, but thorough analysis. The most frequent problem you will incur is the lack of sufficient equity in a property. Loan to value is thus the vital first calculation in your analysis. I you are using a good foreclosure service identifying properties with a low loan to value relationship should be easy. If you are not then you will need to first calculate the approximate value of the property. This can be done with the aid of comparable sales which are available from many sources. Once this is accomplished you will need to calculate the loan balance of the property. This is done by estimating the loan payments and then deducting the principal payments to arrive at an approximate loan balance. To do this you will need a calculator that can do present value calculations. Once you have arrived at the approximate loan value you should add about 6-8 months of back payments. This is about how long it takes the bank to foreclose on a property.