The path to foreclosure starts when a homeowner receives either a Notice of Default from the lender or, in states where foreclosures must go through the courts, a Lis Pendens. The period of time between this first notice and when the lender forecloses on the property is known as pre-foreclosure. The pre-foreclosure process can go very quickly or drag on for months, depending on state laws.

Knowing pre-foreclosure information can be helpful to both the homeowner in jeopardy and potential buyers. At this point in the process, homeowners still have a chance to sell the home, repay the lender and save their credit. Going through an actual foreclosure is about the last thing anyone would want on his or her credit, which puts potential buyers in a great position to negotiate.

During this grace period before the foreclosure auction, a homeowner may be willing to consider a reasonable offer to purchase the home. First though you need to find homes in pre-foreclosure. Online sites offer pre-foreclosure listings by city, state and zip code. These listing are obtained through court records of pending foreclosure proceedings and lender records.

Once you have found a reputable site that you can easily navigate, begin compiling a list of possible properties. It is helpful if you have already determined what criteria you are looking for in a property. If this is going to be a primary residence, you may want to consider schools and commuting time. If this is an investment, you will need to carefully consider the potential return on the investment versus the cost of obtaining the home. A good deal for a home buyer is not necessarily the same as a bargain for an investor.

The next step is obtaining financing, or at the very least, researching your financing options. Your negotiating power with a homeowner is greatly enhanced when you go to them with cash and financing in hand. This is the most crucial step in purchasing a pre-foreclosure property: negotiating a fair deal between you and homeowner. Before making an offer, do your homework on current property values in the area, as well as knowing what the homeowner owes the lender. You will also want to research the title history of the property to be sure there are no tax liens or other claims that would complicate a sale.