Pre Foreclosure Definition – A pre-foreclosure, by definition, is real estate owned by someone who is in danger of being foreclosed on by the lender, usually because they have fallen behind on their mortgage payments. Many of these properties are “sold short,” at below market value — this means Canadian pre-foreclosure listings are in high demand, since sellers can make good profits buying these properties.
A pre-foreclosure in Canada starts when the homeowner has missed one or more payments and is now considered delinquent or in default on the loan. Pre-foreclosures are sometimes known as Lis Pendens or Notice of Default, because a formal warning — a Notice of Default — has been sent to the borrower. (Notice of Default and Lis Pendens are actually nearly identical, the difference has to do with whether the loan has been secured via a mortgage or via a deed of trust.)
Once a trustee files the Notice of Default, it goes on the public record.
Normally when someone experiences a delay in their mortgage payment, it’s due to a negative event in their lives — an illness, recent divorce, etc. The result is they miss payments on their mortgage, making the situation even worse. A pre-foreclosure investor therefore is someone who steps in to help the homeowner get out of a bad situation.
At the same time, since distressed homeowners usually do not have good credit, the foreclosure threatens to further ruin their credit records — something which makes it unlikely they will be able to buy another home or establish another kind of credit soon in the future. If you can purchase their home quickly, you can help save their credit.
Similarly, if the property is foreclosed, the homeowner almost always loses equity in the home. On the other hand, if you can pay the homeowner more than just the balance of the mortgage, they will make more than what they would at an auction — the owner’s equity is usually taken up by court and legal costs, commissions, and the like in the run-up to the auction.
We work with homeowners who are facing foreclosure but who would like to stay in their homes. In some cases we are aware of impending foreclosures before they are made public, which means we can connect you with investment opportunities where you will not be competing with many other investors. Our “Refinance Buy-Back” Pre Foreclosure Programs allows homeowners to stay in their homes while rebuilding their credit, and we have a very high rate of successful “exits” back into the traditional lending system. If you are interested in pre-foreclosure investing, contact us today so we can connect you with deals.