Whether you’re a homeowner struggling to keep up with your mortgage, or simply a prospective purchaser looking for that next prime investment, a pre-foreclosure sale can be an attractive option.
What is Pre-Foreclosure?
The short answer, is that pre-foreclosure is the term for the time between a default and a foreclosure. More specifically, pre-foreclosure occurs when a property-owner becomes delinquent on their mortgage payments, and the lender records a lis pendens, thereby starting the foreclosure process. In this situation, the borrower can still stop a foreclosure action by making payments to the lender, paying the outstanding balance of the amount due, and/or pursuing a pre-foreclosure sale. However, if a resolution is not reached, the lender can move forward to foreclose on the property.
A pre-foreclosure sale is an attractive option for both lenders and debtors of distressed property. Pre-foreclosure sales are not nearly as damaging to the debtors as a foreclosure, and in many cases, be advantageous to all parties involved in the transaction.
The seller of pre-foreclosure property benefits because he or she is able to sell the delinquent property without suffering the severe credit damage that comes at the conclusion of a conventional foreclosure action. The buyer of pre-foreclosure property benefits because they are sometimes able to purchase the distressed property at a significant discount. Finally, the lender benefits because they do not have to take on the inventory of the home.
Despite these advantages, purchasing pre-foreclosure homes is not a flawless process. The pre-foreclosure purchase process still bears many of the same flaws as those sold at a foreclosure auction. For example, buying pre-foreclosure property can take longer than a conventional purchase, as the lender’s approval is required before a sale can occur. Moreover, pre-foreclosed homes may be subject to unpaid federal and state tax liens, which the purchaser will have to deal with prior to closing on the property. Furthermore, some pre-foreclosure purchases may require significant repairs.
In light of these risks, prospective purchasers should contact a Tampa real estate attorney and have a title search run on the property prior to purchase. Buyers should also be conscious of the many pitfalls associated with the buying process and should contact a licensed Florida real estate attorney to help guide them through the process.