Pre-foreclosure Deals in a Hot Housing Market

You have seen all of the advertisements where merchants are hawking their products to help you profit in the home foreclosure market. What they don’t tell you is that not every home in foreclosure is quite the bargain that they would like you to believe it to be. Specifically, if a home is being foreclosed in a market that is hot, you won’t find as near a great bargain as you would in an average housing market. Yet, you can profit from a pre-foreclosure purchase even in the hottest housing market, so read on for some helpful tips.

You would think that a distressed homeowner would dump his property in a hot housing market before things get out of hand. Unfortunately, not every homeowner acts so quickly and the home is taken out from underneath him before a sale can be arranged. When this happens, the bank will look to dispose of the property very quickly and will likely still make a profit in a strong market. However, the homeowner could end up walking away from a foreclosure with very little cash on hand.

Many homeowners are finding themselves in a heap of trouble today, just three or four years after buying their home. Because they elected to get an adjustable rate mortgage, that monthly payment will suddenly spike by several hundred dollars once the adjustment period kicks in. For the homeowner living on the edge this spells trouble – in many cases they will not be able to refinance either as their credit is suspect or a drop in income has made them too much of a risk for a new loan. Either they’ll have to make good on the current loan or hope that a buyer steps forth to bail them out.

By the time some homeowners take action, they could be several months behind on their mortgage and a foreclosure notice may have been served. In many jurisdictions you can learn about a pending foreclosure through legal notices in newspapers or by visiting the sheriff’s department to read legal notices there.

Again, because the housing market is hot, you won’t find quite the bargain you might find elsewhere, but you could still profit from the situation. If the home has jumped in value by 25% since its purchase you could still offer a price of 10 percent below its value and make a nice deal. You’ll offer enough money to cover the mortgage and the owner could walk away with a small profit as well. Next, you could market the home and attempt to receive offers above the asking price. In a hot housing market you can do this so that is where most of your profit will likely come from.

Finally, if you aren’t in a hurry, you could hold onto the home for a year or more and sell it at even greater price as long as the local market trends are pointing upward.