Difference Between Foreclosure
and
Preforeclosure
Distressed properties tend to be a mystery for many beginner real estate investors. Finding these investment properties is often quite tricky, and this fact alone stops a lot of would-be investors in their tracks.
Distressed property is a mystery to many early real estate investors. These investment properties are often quite difficult to find, and this fact alone stops a lot of investors in their tracks. But familiarizing yourself with the ins and outs of distressed properties can be extremely rewarding. As it introduce you up to a whole new category of real estate. One important difference that many beginners do not find is the difference between pre-foreclosure and foreclosure. Do not worry; this guide will tell you about everything you need to know about pre-foreclosure vs. foreclosure.
Pre-Foreclosure
In most cases, property buyers will take a home loan from a financial institution to make their purchase. The mortgage lender will have several conditions regarding how much is to be repaid each month. If a homeowner defaults on three or more mortgage payments, the lender issues a notice of default.At this point, the property becomes a pre-foreclosure, as financial lenders may reclaim it if payment trends are not resolved.
Foreclosure
Foreclosure properties are those that have been reclaimed by their financial lenders. If a borrower is unable to meet their mortgage obligations for several months, the lender will eventually begin the foreclosure process to reclaim the property. Once it is returned to the lender’s possession, it will often be listed for sale. Quite often, foreclosure homes will be available to investors through real estate auctions.
The primary difference between pre-foreclosure and foreclosure properties is, therefore, their owners. The former will still be within the legal authority of the borrower, while the mortgage lender legally owns the latter.
When it comes to the price of Pre-foreclosure versus foreclosure, the latter definitely has an edge. These assets are legally in the possession of financial lenders who have a highly beneficial interest in selling the property quickly. As such, they will usually be listed for lower prices. Also, when making an offer on a foreclosure, real estate investors can reduce the price significantly.
On the other hand, pre foreclosures will be listed at slightly higher prices. This is because they will be listed for sale by the owner who is not yet through the process of foreclosure. To avoid that financial burden, the seller would be very motivated to sell at a below average price. Real estate investors are at an advantage when making an offer on pre-foreclosure because motivated sellers will often be ready to negotiate. So it is very likely that you can reach a price point that satisfies both sides.But still, it will not be as low as the cost of a foreclosed home. When it comes to pre-foreclosure vs. foreclosure value, the latter will always have benefit.
Three aspects to Compare Foreclosure and pre foreclosure properties
Condition
In relation to pre-foreclosure vs. foreclosure livability and condition, the former is usually a clear winner. The Individual sale would still be staying within its pre-foreclosure. On the other hand, foreclosure can be abandoned and in the process of deterioration.
Since the foreclosure process can take months, the properties will not be inhabited or maintained for a long period of time. Thus, there is a good chance that it will not be in top condition.
That being said, the stigma regarding the state of foreclosure can sometimes prove to be wrong. Although the general trend is that the quality of foreclosure investment properties will decline, eager investors will be able to make a larger selection of properties in excellent condition. Great options abound, and it is up to the intelligence of the real estate investor to find them. Great options abound, and it is up to the intelligence of the real estate investor to find them.
Real Estate Investment Strategy
The decision to invest in Pre foreclosure vs. foreclosure depends heavily on your real estate investment strategy. Foreclosure comes in all shapes, sizes, and conditions, as previously mentioned. While one may be highly attractive to future tenants, others may deteriorate. As such, foreclosure is often a preferred source of property for investors who fix and flip real estate. Since these investment properties can be bought cheaply, investors can use a part of the money saved in the budget for repairs and upgrades. Subsequently, the property can be sold at a significantly higher price and can make a big profit to the real estate investor.
Conversely, pre-foreclosures can often be a great option for those who intend to purchase a rental property. As mentioned, since prior foreclosures will have tenants within them until the moment of purchase, they will often be very well maintained. As such, investors often do not need to do much maintenance, repair, or upgrades when purchasing pre-foreclosure. They will be livable and attractive from the moment of purchase.
Buying
The decision to buy Pre foreclosure or foreclosure may seem a bit irrelevant to some early investors: either way, they are both quite difficult to find. As these types of investment properties will not make their way to multiple listing services, they often remain beyond the general public’s view. But knowledgeable real estate investors know where to look.
With the advent of some advanced online tools, the process of finding this type of property is becoming much easier. For example, Mash Wiser Property Marketplace is a one-stop-shop for every listing you can expect in this category. You’ll find a huge selection of bank-owned homes, REO properties, and pre-foreclosures with just a few clicks.
What it’s All About
Buying a foreclosure or a pre-foreclosure can be extremely beneficial. Knowing the right real estate investment tools and the right strategies both can be great investments. The pre-foreclosure versus face-to-face battle of foreclosure ultimately comes down to your priorities as an investor and finding the right property.