KGE Real Estate

The current sub-prime crisis has resulted in many losing control over their homes, while presenting savvy investors with opportunities to pick up property at prices significantly less than the market rate and then flipping to earn a tidy profit. Buying property through the normal route would require a healthy down payment with an outstanding credit record, and that too would not guarantee you a loan, since the credit crunch has resulted in lenders getting starved of lend-able funds. Investing in pre-foreclosures provides an opportunity to earn more profits without being at the mercy of lenders.

Pre-foreclosure homes are those where owners have defaulted on mortgage payments and lenders have served notices on them. These homes have not yet been re-possessed or auctioned off and it is this in-between period, which offers you a chance to pick up property at a discounted rate and have the homeowner and the bank thank you at the same time. The bank too would be interested in disposing of the property for several reasons, most importantly, reduced income, taking control and auctioning can be cumbersome and expensive. You need to do your homework first and identify the correct property in the correct location and in the correct defaulted position before making opting for a property.

Convincing a harried homeowner to sell the property is not difficult since he or she is already under severe financial and mental strain. Negotiating a discounted rate with the bank could be a trifle more difficult, but will eventually prove to be a satisfying deal for everyone involved. Be sure to get the bank’s guarantee that it will not pursue for the difference in amount of what the homeowner owes and what you are paying them. Buying during a pre-foreclosure is also better than buying at an auction where there are several bidders who push the price out of reach and leave you little time to change your strategy.

An added advantage is, you would just have to take over the current mortgage and continue making future mortgage payments without personal liability on mortgage or property, and still claim tax benefits. If you have buyers lined up then you are assured of a neat profit, provided you have negotiated a good deal with the bank.

As your experience in this field grows, you will be able to improve on your negotiation skills and could earn more profits. You could even rent out the home once you have purchased it and this would enable you start your cash flow to pay off your bank. However, the entire process of dealing in a pre-foreclosure requires some knowledge about the legal system so if you are new to this process then hire a real estate broker, an attorney, a tax consultant, a good contractor and tie up with a friendly bank so that all aspects of the deal can be covered without any hiccups.

The pre-foreclosure market is expected to continue for the foreseeable future. Research carefully about the correct market rate of property and then pursue the homeowner and his lender until you acquire the property. As the unfortunate saying goes, “One Man’s pain is another man’s gain”, use the current market situation to land some real good pre-foreclosure deals.