Pre-Foreclosure

Although it's fairly common knowledge, foreclosures occur when payments aren't made on a loan that is secured by real estate. Some of the value investors seek when buying foreclosures can come from the normal terms of the loan, some can come from price appreciation in the area where the property is located, and some can come from the lender not wanting to deal with the property.

While it's certainly possible to find foreclosures selling for 50% of their value, most people will find it easier, and more efficient, to focus on properties selling in the 65 to 80% of value range. So, how do you find them? Let's start at the beginning.

When payments aren't being made on a loan secured by real estate, lenders will often initiate foreclosure proceedings when the third payment is missed. When the lender has begun foreclosure proceedings, but the owner still has possession and the right to sell the real estate, these properties will usually be called pre-foreclosures. Since lenders cannot release information about pre-foreclosures, and homeowners often do not want to publicize their situation, you need an alternate way to find these properties, along with owner contact information. That source of information on pre-foreclosures is your county recorder. Virtually all documents regarding real estate transactions are recorded and kept by the county recorder, and because they are public documents, you can access and search those documents.

Most pre-foreclosures can be identified by the initial foreclosure document, which in most states, will either be a Notice of Default or a Lis Pendens. A Notice of Default, or NOD, is used in non-judicial foreclosure states, while the Lis Pendens is used in judicial foreclosure states.

In a simple world, you'd be able to find your pre-foreclosures by asking your county recorder for a list of all the NOD's or Lis Pendens recorded that week, and they'd give you the list, with names, addresses, phone numbers along with other information you might want. It doesn't work that way. But, since many recorders have established searchable websites, you can do something similar. Use the online recorders site to find the pre-foreclosures by searching for those document types. That should get you a list of owner names and document numbers. If you can't view the actual documents online, you'll then have to go to the recorder's office with your list, search by owner name or document number, and look at the document (Notice of Default, or Lis Pendens) which will reference the original loan, the property address and the default amount. .