Generally speaking, people don’t stop paying the mortgage for the fun of it. When someone can no longer make mortgage payments, they have already been on a rough financial road. While pre-foreclosure investing offers unique opportunities to buy properties at great savings, it also requires that you know how to negotiate with distressed homeowners.

What exactly is pre-foreclosure? This is when the lender has initiated foreclosure proceedings because a homeowner is behind in mortgage payments. The house is still belongs to the borrower, but is in the process of being taken over and sold by the lender. It is during this time that a homeowner is weighing the options and looking for any way to avoid foreclosure.

Do Your Homework

Pre-foreclosure tips include looking to a wide number of online sources to find homes in this stage of the foreclosure process. In many states, pre-foreclosures are a public record and can be found in the newspaper. Also, many websites specialize in listings of pre-foreclosure homes.

At this point you should consider a few properties for possible investments and begin doing some research. You should do a title search to see if there are any liens against the property or multiple mortgage holders. Buying properties with these kind of problems can be time consuming and rarely worth all the extra work. You should try to get an idea of the condition of the properties you are interested in, however, always be respectful of the homeowners’ privacy.

Next, determine what the fair market value is of homes in the area so that you can make the homeowner a reasonable offer. Finally, secure your financing and have some cash available. You want to be in a strong bargaining position when you make an offer, and money talks.

Approach the Homeowner

How you approach the homeowner can make or break a deal with them. Building a good rapport and making them feel that you have their interest, and not just your own, at heart will help move the negotiations along. Just because they are motivated to sell, doesn’t mean they are going to give the house away.

You can either make an offer to buy the house with your own financing, or you can offer to work out a deal with the lender to take over the mortgage. Each option depends on your ability to obtain your own financing, or the homeowner’s willingness to hand their lender information over to you. You should also consider what type of financing is going to give you the best terms.

If the homeowner agrees to sell you the property, you may want to consider renting it out to them, with either a short or long term lease while they decide their next move. A pre-foreclosure sale can move pretty quickly, and knowing that they don’t have to rush to move out may be the tipping point in your negotiations.