What is pre foreclosure?



When a homeowner defaults on a loan, the lender sends a public default notice triggering foreclosure process. The time before when the lender seizes the house is called pre-foreclosure period. Many homeowners choose to sell off their homes during this period to repay the loans. These are pre foreclosure homes which are then grabbed by others.

Some important points to keep in mind:

?Pre-foreclosed houses are sold at a discount rate of 20-35% of the actual market value. This is a huge margin and these homes can be sold off at a great price after a few repairs. But the house should be thoroughly inspected to make sure the cost of repairs isn't too much.

?Pre- foreclosed houses can be bought without any down payments and are therefore advantageous for people who haven't saved up for a house or for first time buyers unlike foreclosure auctions that require the lenders approval as well as require the buyer to have the cash ready at hand to bid.

?Because of various loan covenants available in VA, FHA and other government insured loans, families who intend to buy pre foreclosed homes are given priority over investors who plan to acquire the property for investment purposes. This can be very advantageous to first time home owners.

?There are many sites that offer complete listings of such homes including those of government loans. So searching for pre foreclosure homes is very easy and requires minimum effort.