By: Seth Lejeune
It’s inevitable. I get the random text from a client or acquaintance with an address and something that read, “Whoa… is this for real?” or “Why hasn’t this shown up in my MLS portal?” I then hop on my trusty MLS to find no such address for sale. Hmmmm…. AHA! It must be another of these pre-foreclosures!
What’s a “pre-foreclosure” you ask? Well, unbeknownst to most people, your mortgage is recorded in public record. Meaning that if one does enough digging they can see how much money you borrowed to purchase your property, when you borrowed it and what type of loan. These public records are available to Zillow along with lots of other information. Usually your mortgage goes unnoticed by these public sites, but in the case of a pre-foreclosure your lending institution has filed what’s called a “default notice” on the property. In English, this means that the homeowner is behind on their mortgage and the lender has noticed and taken an action.
These homes are listed by Zillow because for those in the real estate profession, this can be useful information. For example, if someone is behind in their mortgage, there is a chance that owner would perhaps sell their property at a discount to get out from underneath of it. In other cases, those investors may wish to assume the mortgage. Overall, it can be seen for investors as a head start on the eventuality of a short sale or foreclosure. Keep in mind, only the most seasoned and unflappable of my fellow realtors/investors have the guts to call these homeowners.
Imagine the following scenario: There’s a family of four. One of the spouses handles all the finances and has not worked up the courage to tell the other they’ve fallen behind on their mortgage payments. Now imagine an inbound call from an investor to the land line (usually the one in public record) to the spouse who is unaware of this situation. The agent uses a sales script like, ” Hello, I’m calling because I noticed your home listed on Zillow as a pre-foreclosure and didn’t know if it was worth me coming by to talk about a way I could help you out of this situation. Would that interest you?” Needless to say, this would be jarring for anyone who thought their mortgage payments were on track. Almost always it’s a hang up or some kind of angry response to this kind of a call. This is one of the uglier sides of real estate investing, but it exists and I know people who find deals this way.
As for the rest of us, a pre-foreclosure is either a sign of things to come (short sale or foreclosure) or a little public shaming to make sure that people continue to pay their mortgage. So the next time you see your neighbors house pop-up as a pre-foreclosure, you now know what you’re looking at. Do with this information as you see fit.
If you have any questions regarding this topic, please note I am a certified Short Sale & Foreclosure Specialist (SFR) and am happy to help you.
Operating Partner and Leader of The Seth Lejeune Team at RE/MAX HOMEPOINT. Founding Partner at BWB Capital – firstname.lastname@example.org / 610.804.2104