A common way in which investors locate pre-foreclosures is by obtaining a Lis Pendens Listing. When a borrower fails to make his or her mortgage payments, then he/she will either file a Notice of Default or a Lis Pendens (i.e. notice of a pending lawsuit). Owners generally do not list their homes on the market once they become pre-foreclosures. Some do not even realize that their mortgage default has been made public in a foreclosure listings site. A notice of default or Lis Penens (i.e. notice of pending lawsuit) is public information once it is recorded in the county records office. Foreclosure listings sites obtain much of their listings from the county records or county clerk’s offices.
There are a number of different sources that provide this public information: The legal notice section on local newspapers as well as the county records office/county clerk’s office provide an updated list of filed lis pendens. However, obtaining this type of public information from a county records office takes some legwork and a lot of patience. Each notice of default or Lis Pendens contains the following information:
A faster and more convenient method would be to search through a database from a reliable paid foreclosures listing site. You should keep in mind that properties do not remain in the foreclosure process for an infinite amount of time. Eventually, the title will be reverted to the bank or lender that granted the loan. The sooner you find the property that has a lis pendens filed against it, the more time you have to do your research on the actual value of the property as well as a negotiations strategy in order to obtain the best deal.
Some of the best bargains can be found in properties that are at the beginning of the foreclosure process. However, properties do not remain in the pre-foreclosure phase forever. Once the pre-foreclosure property is placed in a public auction, the owner-in-default no longer holds a right to possession and the title of the property is transferred to the mortgage lender. Also, the owner is able to stop the foreclosure process at anytime prior to the day of the foreclosure auction). Because the pre-foreclosure stage does not last forever, it is a good idea to make sure that the property is still being foreclosed on. The best way to do this is to contact the trustee (i.e. the lender) or the attorney: they will have the most updated information in regards to whether the owner has sold or reinstated the property.
You do not want to be held responsible for any encumbering debts/liens that are attached to your pre-foreclosure property. Keep in mind that the first mortgage has priority over all other "junior liens" (except tax liens, which take priority over all other liens and continue to be in effect after the foreclosure auction). What is a lien? A lien is a legal right to take ownership of a borrower’s property in the event that the borrower fails to comply with the written agreement that was signed at the formation of the mortgage contract.
A common tactic used by savvy investors in finding the true market value of a property is by gathering the median value of similar properties that are situated within the area. You are able to find the true market value of your pre-foreclosure property by comparing the price of other similar homes within the same neighborhood. There are a number of foreclosure listings sites that provide comparisons of properties that are situated within close proximity of your house
Once you find the pre-foreclosure homes that you are interested in, contact the owner-in-default using the information that you gathered from your foreclosure listings site or the county records office. It is a good idea to find out the homeowner’s as well as the lender’s positions in order to assess their motivations. You may want to know what the borrower’s prospects are for being able to pay off the loan before the property is actually foreclosed on because the current owner has right to title until the day of the auction. You do not want to waste your time on a property that is highly likely to be withdrawn from the market by the owner bailing himself out of his debt. It is a good idea to focus on a property with an owner who’s only option is to find a buyer to help take over his or her loan payments in order to save his or her credit score. Once a property is foreclosed on, it will make it difficult for the owner to ever be approved for a new mortgage. Thus, when it is in the owner’s best interest to sell his or her property, you and the owner in default will be in a win/win situation.
There are three ways in which you are able to contact the owner in default. You can either mail a letter, give them a call, or knock on their door. Because the entire situation is fairly sensitive, some investors choose to refrain from asking the owner outright, but instead, many investors choose to send a general advertisement in the form of a letter or a postcard asking if there is anyone who is looking to sell a pre-foreclosure property.