You may have seen the term pre-foreclosure being used quite frequently online, and wondered exactly what the term means. Many people think that is may be a short sale, or perhaps the last few days before a foreclosure takes place. It is often used in the context of advertising for a pre-foreclosure list.
People may wonder whether having access to this list means that they will be able to purchase a property before it is placed on the market, and if you are in the business of property development then this could potentially give you an edge over other buyers that may be interested in the same property. However, when you search for a definition of the term ‘pre-foreclosure’, only definitions of foreclosure are found, which does suggest that ‘pre-foreclosure’ is not an official term that is used by lenders.
There is a misconception that pre-foreclosure must be what happens before the foreclosure takes place, so it is in effect the period before the lender takes back the property. However, in the eyes of the lenders there is no such thing as pre-foreclosure. With this in mind, you may be starting to wonder what information a pre-foreclosure list actually contains.
It is nothing new for lenders to be publishing a list of borrowers who have defaulted on at least one of their mortgage payments, and it is this information that you are likely to be getting on a pre-foreclosure list. Some companies have made a business out of making this information available to customers who pay a monthly fee in order to receive updated lists. As well as the lists that are available to the general public, the company may also do some research of its own to identify people who may be likely to default on their mortgage.
The main question that you would need to ask yourself if you are thinking of subscribing to a service like this, is what you would do with the information on these lists when you have it. It is worth remembering that some of the borrowers that appear on these lists may only be a month or two behind on their payments, and that they may have an arrangement with the mortgage company to catch up on their payments and avoid foreclosure. It should not be assumed that everyone who is on the list is in imminent danger of losing their home.
In this current economic climate, lenders are more likely to try and work with borrowers who are in difficulty to come up with a solution that avoids foreclosure, It is for this reason that in a number of areas around the country, foreclosure rates are at the lowest they have been for a number of years.
Companies that offer pre-foreclosure lists are not really offering any information that you could not find out yourself, and we have already established that there is no such thing as pre-foreclosure in the eyes of mortgage lenders. If you are thinking of buying a property, for you to live in or as an investment, then the most practical advice is to contact your realtor, as they will be able to provide you with all the information you really need before making a decision to buy.