Purchasing Pre-foreclosure Real Estate: Okay For First Time Homebuyers?
By Gerry Marsh

Professional real estate investors know that buying real estate is difficult, frustrating and at best a complete waste of time. That is, it can be all of those things to an unwary new investor fresh out of a "Make Big Money In Real Estate" seminar. But for the knowledgeable investor, real estate really can be a satisfying source of good income - and a golden opportunity for first time home buyers.

The Right Type Of Buyer

Most home buyers looking for a personal residence do not even think about property because of the imagined problems. But they should. It is puzzling in a way. There are many couples starting out without much money or credit who buy a "fixer" and spend much time and money fixing it up while they are living in it. They then turn around and sell it to move up to a more expensive fixer and start the process all over again.

If your are this type, you should really think about a property. But you need to study this a little first so you don't suffer the aggravation common to so many attempting this route. Let's start with the basics.

Foreclosure or Pre-foreclosure

The term "foreclosure" makes most people think of a scene in which a home is auctioned off on the court house steps and you bid against other interested investors. You do not want to do this. It is difficult to get the edge on the experienced bidders who have done this many times. What you want is a "pre-foreclosure" property.

A pre-foreclosure home is one on which the lender has begun because the owner failed to make several mortgage payments but it has not yet reached the auction sale stage. A key to successful pre-foreclosure investing is to build trust with the homeowner so that you can gather the information you need and move quickly to put together a deal that everyone will agree to.

Pre-foreclosure Properties Can Be Profitable

Done correctly, purchasing a pre-foreclosure property can be a good experience even for a first time home buyer. You have sufficient time to research the property because you can buy them up until the day of the auction. When you buy a pre-foreclosure, you help

save the home owner's credit by avoiding a auction. You should remember this. You are not taking advantage of the homeowner in distress. You are helping him/her to avoid a current and many future credit related problems. Pre-foreclosure investing makes everyone involved a winner.

Lenders typically don't bother explaining borrowers' rights and options. They just want to collect their money. You have the opportunity to help homeowners avoid foreclosure, salvage their credit rating, and get on with their lives. And you can gain a home of your own - or resell it and make money by doing it.

You can end up saving tens of thousands of dollars on the purchase of your home by buying a pre-foreclosure property. It can be your opportunity to buy low and sell high, quickly maximizing your equity.

Repairs May Be Needed

It is not all gravy. Many of the better opportunities you find will need a lot of TLC to get them back in shape. They may need carpeting, up-dated or repaired appliances, electrical or plumbing. Roofs may need to be replaced. All of them will probably need painting and some landscaping work. If a person is short of money and facing foreclosure, these things simply do not get any attention.

Summary

Purchasing a pre-foreclosure property can be of a benefit to both yourself and the current home owner. It is not always easy but it can be very rewarding. Unless you are an experienced handyman yourself, you need to get an estimate from qualified professionals on what it would take to bring the home up to standard. Don't rush or get discouraged. Buying a pre-foreclosure home gives you plenty of time to make unrushed decisions.

About the AuthorGerry Marsh is a successful webmaster and on-line publisher in the fields of real estate and financial services. Download his free report Foreclosure Investing - How To Avoid 8 Critical Mistakes and find more information on buying a home with bad credit on his blog.