Now, more than ever, people are looking into investing in real estate preforeclosures. A preforeclosure is a home that has a notice of foreclosure filed. An interested person will contact the owner in an attempt to buy it and pay off the mortgage before it goes to foreclosure auction.
People just starting out in the real estate market often look for preforeclosures because they don't necessarily need money to make money. There are a couple of ways to handle a preforeclosure. One is, once a deal is secured through a contract, the contract can be sold to an investor who has the means to purchase the property. Often times, a person on the lookout for preforeclosures is called a "birddog", because he or she finds a deal and then turns it over to an investor who will pay for the time invested in finding the property. There are also those who find a preforeclosure and invest the money to purchase it - then quickly turn around and sell it.
If you are planning on buying a preforeclosure, in order to be successful, certain steps should be followed. First, check with the recorder's office for Notice of Trustee Sales filings. Look for property that has a first deed amount divided by the fair market value less than 75 percent. Next, contact should be made with the owner to set up a meeting. Before the meeting, gather information about the owner that might show an immediate need for the property to be sold -- like divorce. This information will give you ammunition to offer a lower buying price. Also, obtain a preliminary title report on the property. Always check out the property and have the people named on the title sign a quitclaim deed (a quitclaim transfers any interest you may have in a property to someone else with no guarantee that there are no other claims against the property). Always make sure that the quit claim is notarized. If there is a second mortgage, try to negotiate with the mortgage holder to buy it. After the house is vacated, pay the seller and prepare the house to sell or search for an investor who will pay you for finding the property.
If, for some reason, you do not get paid, file a Notice of Interest or Notice of Lien against property. You can also have a non-circumvent agreement stating you get paid a set amount at the close of escrow. You can give that document to the title company that should then pay you directly.