These methods work in Florida because we have mortgages, however I am not sure of the process
for states that use deeds of trust. Much of this information will apply to Florida and its laws so it
is best to get the overall gist and apply it to your area.
I have purchased several properties over the last 6 years in the Sarasota, Florida area by
finding pre-foreclosures. Pre- foreclosures are simply homes that have gone into foreclosure but have
not sold at the auction yet.
This used to be a great way to pick up undervalued real estate. However, recently it has not
worked that well do to the super hot Sarasota, Florida real estate market. I started out with
pre-foreclosures because I did not have the money to purchase homes at the county auctions. Typically
the auctions require you to pay cash at the day of the auction.
Step 1 - Find the website for your county that contains courthouse information. Many counties
now have their court information online, however smaller areas may not be that advanced yet. You are
basically trying to find information on lawsuits.
Step 2 - You will want to look for people who are being sued by their mortgage lender. In my
area the very first step to a foreclosure is the "Lis Pendens". Latin for "a suit
pending," a written notice that a lawsuit has been filed which concerns the title to real
property or some interest in that real property.
When a homeowner stops paying their mortgage the time it takes for a bank to start foreclosure
proceedings varies. However, I have noticed it is around 4-6 months. I guess the banks figure at that
time the homeowners are in too deep and will not be able to pull themselves out.
Every counties computer query system is going to be different so this is where you will need
to do some investigating. Typically, you will see the large banks or lenders vs. Joe Schmoe. This is
the first step in the foreclosure process. These people are going into foreclosure.
Step 3 - Once you have found the "Lis Pendens" create a list of people who are in
foreclosure. Take this list and cross reference them with county property records. Get to know your
local real estate market. I am Realtor here in Sarasota so I know the real estate market well. There
will be houses you may not want to buy so there is no point in chasing them. You also need to know the
real estate market to find out if what you are buying is a deal. There is no point in going through
these steps if you are just going to be a house for retail. The point is to buy the house undervalued.
You need to know the real estate market to determine what is a good deal and what is not.
Step 4 - Contact these people - find a way to contact them that most suits your personality.
You can call them on the telephone, knock on their door or write them a letter. I took the less
aggressive approach and wrote letters. Sometimes these people do not want phone calls or to be
contacted in person because they may have already been getting harrassing phone calls from banks and
Step 5 - Try to buy the house. Be sympathetic to their situation and try to find a win-win
scenario for you and the homeowner. Obviously, you are trying to buy the house at an attractive price
to you. This price will depend on what you plan to do with the property. If you plan to live there
then you don't need too much of a discount. If you plan to flip it then you need a larger discount.
Here are a couple of things to remember about buying homes in foreclosure:
Banks will take less than what is owed to them. If you find a with a large mortgage in relation
to it's value you may need the bank to take a discount on their mortgage. I have done this with
clients when selling their home. However, banks are not dumb and they know the values of real estate
have been going up the last few years so it may be difficult.
Here in Florida the foreclosure process from start to finish usually takes 3 to 6 months.
You can pull someone out of foreclosure up until the actual foreclosure sale and in some
instances even after the sale.
Legitimate lenders do not want to foreclose and take back homes.
In most situations you will be dealing with the foreclosing attorney not the actual bank
filing the foreclosure suit.
This information will start you off to finding pre-foreclosures to buy. In closing, I will
say that it has been since November 2003 that I bought my last home this way. I bought a house for
$69,000, spent about $30,000 cleaning it up and as of today it will retail for about $270,000. Of
course, the home prices in my market have increased dramatically since I bought that home.
Lately, like other markets, my market has been too hot to find a property that much
undervalued. With the number of articles in the local newspaper most people are aware of how hot the
market is. However, within the last few months the market has slowed down. As a Realtor, I have seen
many people stretch themselves to get into a house they really can't afford. Flexible lending
policies should lead to more foreclosures. Good luck.
Marc Rasmussen is a Sarasota, Florida Realtor and real estate investor. For more information go
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