| Important
Points about Buying Preforeclosures
There are two very important points that you should keep in mind when
buying pre-foreclosures properties.
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All of the debt on the property remains
on the property, until it is sold at auction.
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Only those individuals who are on the
title to the property can sell the property.
These are obvious points, but you would be surprised how many investors
"forget" them and end up missing out on a deal. What's worse is that
investors who put up their money before checking these points could end
up losing some or all of their money. Don't let this happen to you.
Remember, you are in the business of making money not losing it.
Point #1: Verify Debts
You must verify all of the debts that have been recorded against the
property. This includes mortgages or deeds of trusts, property tax
liens, mechanics' liens, IRS liens, and judgments (see the article on
Junior Debts). Contact the owners and ask them about the debts on the
property. They may or may not tell you of every property debt, so you
should verify the information by doing your own title search. Once you
have identified all of the recorded debt, do your analysis to see if it
makes sense to buy the property. If there are significant junior debts,
you may want to wait until the auction to buy the property. It's
possible that some of the junior debts could be wiped out, and you could
end up with a great deal.
Point #2: Verify Owners
You must identify all of the property owners and determine whether they
are all willing to sell the property before you waste a lot of effort.
Most property owners will be straightforward about who else is on the
title to the property. However, there may be owners who are not
completely candid about this information. These property owners could
include estranged spouses who may not care, antagonistic family members
who may be arguing about ownership rights, and out of town relatives who
may prefer not to be involved. These are some of the realities that
affect your buying decision, and justify why you need to determine who
all of the owners are. Again, you need to verify this information. It
would be very unpleasant for you spent a lot of time and money
negotiating a great deal, only to find out that all the owners have not
signed or will not sign the contract. Without the signatures of all
owners, the contract is null and void.
Summary
Pay attention to these two points every time you invest in
preforeclosures. Don't get careless and don't make the mistakes that
many investors continue to make. Always verify the total number of debts
and the total number of owners before committing your time and money.
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