by If you are thinking about investing in foreclosures there are some key points for you to consider before you begin investing FORECLOSURES IN TEMPE AZ.
The first step for you to understand is how the foreclosure process works. The foreclosure process can be broken down into three key components.
- Pre-Foreclosure
- Foreclosure Auction
- REO
Pre-foreclosure
The first step in the foreclosure process is called pre-foreclosure. When a homeowner has not paid their mortgage for more than ninety days the bank that owns the mortgage on that property files what is called a “lis pendens” which means “suit pending” in Latin.
A “lis pendens” is a written public notice that a lawsuit has been filed concerning real estate. This notice is filed in the county public records against a piece of property. This notice is also often listed in the classified ad legal section of certain newspapers. Filing this public notice alerts any potential purchaser or lender that the title to this property is “clouded” or unclear.
When a property has a “clouded” title then the title is not “free and clear” which makes the property less attractive to potential buyers or lenders. In reality, once a “lis pendens” is filed, a property cannot be sold or refinanced without the buyer being fully aware of the fact that the “lis pendens” has been filed. The only way to get rid of a “lis pendens” is through foreclosure which wipes out a “lis pendens”.
Once a lis pendens has been filed the property is considered to be in pre-foreclosure. If you subscribe to a public database like and many other similar sites you can get access to the properties that are in pre-foreclosure. You can also get a list directly from your county clerk by visiting your county courthouse. In some counties these lists are even available online.
If you are investing in pre-foreclosures you are buying a house directly from the homeowner. This negotiation with the homeowner is usually done without the banks knowledge. If you are investing in pre-foreclosures you will need to negotiate directly with the homeowner about purchasing their house. Since the “lis pendens” filing is public knowledge investing in pre-foreclosures is very competitive.
If the house has no equity then you will need to negotiate a short sale with the bank. A short sale is where a bank agrees to take less than the full amount owed to them. This occurs when a buyer is only willing to purchase the property for less than the amount owed on the mortgage by the seller. In the case of a short sale the bank is aware of the process since you will need to negotiate with them. The department at the bank that is responsible for negotiating short sales is called “loss mitigation”.
There are numerous online sources of pre-foreclosure lists which make the barrier to entry in pre-foreclosure investing very minimal. Anyone can become a pre-foreclosure investor simply buy purchasing a list of homeowners in foreclosure. Since the information is public record it can even be obtained for free by visiting your county courthouse.
For this reason, pre-foreclosure investing is fiercely competitive. Since there are so many potential pre-foreclosure investors, the homeowners in foreclosure are literally bombarded with offers to purchase their homes. This makes it difficult for investors to differentiate themselves from one another to the homeowner. Additionally there is often hostility and anger from the homeowner since they do not want to be bothered by “foreclosure sharks” or people that they perceive as trying to take advantage of their situation.
