Buying multi family homes in pre-foreclosure directly from banks: what you should know

Buying multi family homes in pre-foreclosure directly from banks is one way to find extraordinary bargains and get your start as a real estate investor. Multi family homes offer possible income from tenants and renters and can afford you a nice place to live. But there are a number of issues to be aware of when buying multi family homes in pre-foreclosure directly from a bank.

The crisis in the nation’s housing markets has made a growing number of potential homebuyers and real estate investors aware of the many bargains to be found among foreclosed properties. While there may be an equal number of opportunities to snag valuable properties in pre-foreclosure, the process can be trickier given the timelines.

A property falls into the pre-foreclosure status when the owners fail to keep up wit the payments. After missing a certain number of payments on the loan and falling behind (usually 60-90 days), the lender will send a formal Notice of Default to the owners, thus putting the property in pre-foreclosure status. The Notice of Default typically spells out the time the owners have to resolve the past due balance and the options available to them. One of those options is to sell the property to get out from under the burden of a loan that they have been unable to maintain.

While the majority of multi family properties falling into some stage of the foreclosure process are backed by government-secured loans, there are some that were financed directly by banks. While many banks sell distressed properties at public auction, you also have the option of purchasing a home prior to it landing on the auction block.

The first step begins with you finding a property you’d be interested in. Since Notices of Default are public records, you can tap into a number of resources to track when a multi family property falls into the pre-foreclosure category. There are online resources, services such as RealtyTrac and there are records kept at the County Clerk’s office of most counties,

After you’ve found a property, you should contact the bank about purchasing the house. This is one of the most important steps when it comes to buying pre-foreclosure multifamily homes from banks. There is always a chance that the original owner repaid past due amounts. If you do your research first, you might find that the property is no longer for sale.

Once you verify that the property is in fact for, you can check out the value of the property. Look at the overall condition, verify any needed repairs and get estimates of those repairs. If possible, have a formal inspection competed by a licensed home inspector.

After you decide on what you believe will be a competitive purchase price bid, be prepared to wait through what can be a lengthy process. There are several different ways that pre-foreclosure multi family home bank sales can occur. The bank might give you the chance to pay the amount due and take over the mortgage or it might require that you purchase the home for the full price or apply for your own mortgage. They may also take their time in considering your offer (and others if they get them) and they may not always give you a reason or additional options in the reject your offer.

Buying multifamily homes in pre-foreclosure directly from banks can open many doors for great opportunities in real estate investing. Having an experienced guide to help you navigate the process is helpful and Reply! can help by putting you in contact with local real estate professionals who have that experience.