Buying A Foreclosure Property Before The Sale
Can it be done? YES! Is it easy and fun? NO!
Properties in Harrisonburg and Rockingham County that are being foreclosed on are almost always advertised in the Daily News Record as an upcoming “Trustee Sale.” When I see good opportunities in these notices, I post details here at HarrisonburgForeclosures.com.
Oftentimes, information about these foreclosure sales is available several weeks before the actual sale, and thus interested buyers sometimes wonder if it is possible to short circuit the foreclosure proceedings, and buy the property before the sale. The simple answer — yes, this is possible. However, there are typically a few obstacles:
Owners in denial — or seclusion — or anger!
Being in situation where you can’t pay your mortgage any longer, and the bank is foreclosing on your home is not AT ALL a fun situation to be in. I don’t at all intend to make light of the unfortunate light that some homeowners find themselves in. And thus, if you are hoping to purchased a foreclosure property prior to the trustee sale, it is important to consider the perspective of the homeowner.
Many such homeowners are in denial — thinking or hoping that they will catch up on their mortgage payments such that the sale will not take place. Others will be very difficult to reach, and it won’t be possible to discuss a way to help them sell their home without being foreclosed upon. And some homeowners will be downright angry if someone contacts them about their home, and it’s status as a pre-foreclosure property.
The lender can’t sell you the home before the trustee sale, so if you are to attempt to purchase it beforehand, you’ll have to deal with the homeowner. Be careful how you broach the subject, and be sensitive to a time of difficult life circumstances!
The timing will be tight!
While there are often several weeks between the first notice of a foreclosure and the actual foreclosure sale, if you are financing the purchase, you will need every last day of it if you hope to purchase the property before the sale takes place. If you are purchasing the property with cash, or if you already have your financing lined up, you may not have as much of a time crunch.
Sometimes the lender will postpone the foreclosure sale if they can be assured of a pending successful sale of the property that would pay off their loan. If they have doubts as to the buyer’s performance, or doubts as to whether the purchase price will pay off the remaining balance of the loan, they may foreclose as planned.
If you are going to attempt to buy a foreclosure property before the sale, be sure to have all of your financing details arranged ahead of time!
Those second lenders don’t like being in second place!
Finally, it is important to recognize that there is sometimes a second mortgage or line of credit on the property being foreclosed upon. If a primary loan of $180,000 is being foreclosed on, it won’t necessarily work for you to swoop in and offer the owner $181,000 because you know this will pay off their first mortgage and because you know the property is worth $200,000. If a second mortgage (of perhaps $10,000) is in place, the owner won’t be able to sell the property to you unless they have other funds in place with which to satisfy the second loan.
The potential existence of second mortgages doesn’t mean you shouldn’t pursue a foreclosure property prior to the sale, but it does mean that it will be worthwhile to do some preliminary research before making a proposal to the homeowner.
It can be beneficial for multiple parties to purchase a home before it is foreclosed upon. You, the buyer, can get a good deal on the house. The seller can avoid a foreclosure scar on their credit history. The lender can avoid the hassle and cost of foreclosing on a property. But if you are going to attempt this feat of real estate acrobatics, be sure to review the factors above and consider how to adjust your proposal to make the scenario work best for all involved parties.