There are several different ways to purchase foreclosure real estate. The strategies are arranged on a time continuum according to when in the foreclosure process the deal is made.

The first opportunity to purchase is buying directly from the defendant (property owner) during pre-foreclosure. Pre foreclosure is the time after the plaintiff (lender/bank) has filed the complaint and before the Sheriff auctions the property.

Research before the actual contact with the defendant is time consuming. The process can be tedious and detailed. Usually, the defendant is not co-operative. The circumstances leading to the foreclosure can not always be reversed. Many times the defendant, even though he is responsible for the situation, seldom wants to take any action.

Often, the real estate is abandoned and the owner can not be found. In this case, foreclosure real estate investors have a second choice. Make a deal with the foreclosing lender(s)!

We should all be aware the plaintiff (lender/bank), who initiates the foreclosure action, does not have the ability to sell the property to you. The Plaintiff does not own the property. They are just making a claim, so to speak, on an asset pledged to secure a debt incurred by the defendant.

Under the new "Fair Foreclosure Act of 1995", abandoned property does not have to go through the auction process. Foreclosing lenders hesitate using this avenue of possession unless all of their "t's" are crossed and "i's" are dotted. This procedure is risky since abandonment is not well defined within the new law. As a result, to my knowledge, very few foreclosures have taken place under the title of abandonment since the new law was put into force.

If the property is not abandoned and you can not make a deal with the defendant, you may be able to negotiate a "short sale" with the foreclosing lender. A "short sale" involves buying the mortgage paper at a discount. This technique is usually left to those who have years of experience dealing with lenders. It is not for the new investor or those not experienced in the down side risk of this kind of complicated transaction.

The next natural step in the evolution of the foreclosure process is to bid at the Sheriff's auction. Mind your "P's & Q's" (What ever that means). The auction is reserved for those of us who know exactly what we want, have diligently performed all the necessary research and are clear about the price we are willing to bid. Don't forget, there are other expenses over and above the price bid at the auction.!

The last opportunity to acquire the property is purchasing from the foreclosing bank, immediately after the sheriff's auction (The foreclosing bank owns the property if they are the highest bidder at the auction.). Even if this is the only strategy you use, you should still follow all of steps in the foreclosure procedures.

In order to deal, one must be ruthless. After all, you have tried to negotiate with the defendant to no apparent success. You have tried to buy the mortgage paper with the bank and they were not in a mood to deal. You followed and perhaps bid at the auction, and were not the winner. Now you are confronting the successful bidder. The prize winner. The foreclosing Bank. They have won the prize. The ugly chicken, ripe with the stench of rotten eggs.

They did not want to win the prize. They would have been happy as a lark if someone else was the winning bidder. Banks are not in the real estate sales business. They do not desire to own "Non-Performing" investments. Their supervisory associates frown on the bank owning any real estate from non-performing loans. They are in a fix.

If you have done your home work, this means you have tracked and researched this property from the inception of the foreclosure to present, you are more equipped with fact and information than the new present owner, THE BANK!

There are many ways in which to buy the property from the bank at prices lower than your original bid at the Sheriff's auction. Remember, the longer the bank holds the property, the more it will stink up their whole portfolio. You are in a position of power. Use it!
KNOWLEDGE IS POWER