Foreclosure InvestingThe Pre-foreclosure investing niche is the process leading up to the final day a property in pre-foreclosure is possessed by the bank.  In part 1 of  Niches That Bring you Riches Pre-Foreclosures I covered 7 great reasons why Pre-foreclosure properties are a good niche to consider. As a seasoned real estate investor that specialized in this investing niche at one point, I can tell you that Pre-foreclosure investing does have some minor draw backs every beginner real estate investors should be aware of.

What are downsides of this niche?

  • You’ve got a limited time (varies state to state) to contact homeowners and get signed contracts, title work, funding, etc.
  • Most pre-foreclosure homeowners are in denial about their situation and/or mad at the world due to all their stress and debt collection calls they get. Sometimes you can be blamed for taking their house, when in fact, you are not the problem, but the solution. They were in this situation before you entered their life.
  • Many really good deals are redeemed (caught up) by the homeowner, and the foreclosure cancelled, before the courthouse auction. So when you reach out to those on pre-foreclosure lists, you might be marketing to someone who has found a way to keep their property.
  • Homeowners are overwhelmed with the financial stress, receiving letters and phone calls from bill collectors and often ignore your attempts to reach them.
  • Many are in pre-foreclosure because they have no equity in their property to refinance which could help them hold on to their property a little longer. When there is no equity or negative equity your options to profit from this type of investment are limited and possibly more time consuming.
  • There are some strict laws in many states for dealing with a person in foreclosure. Know your State’s foreclosure restrictions, forms and processes to avoid litigation.
    1. Provide contracts, disclosures and paperwork to an experienced real estate attorney for final review – specifically asking for him to point out any laws that are being broken when presenting paperwork to those in pre-foreclosure. Be sure to have your paperwork and processes to be used approved by a real estate attorney.
    2. Provide steps you will be taking to market and interact with sellers to your attorney assuring you are following laws for how you are to work with those in pre-foreclosure.

What are good market conditions to consider this niche for investing?

You want to look for the following market conditions in the area (s) you plan to research and invest.

  • There is a high number of homes in pre-foreclosure
  • Interest rates on loans are high
  • Lenders tightening their belts and not flexible

What are bad market conditions where you might want to avoid this niche?

Avoid focusing on this niche if these conditions exist.

  • There is a low number of homes in foreclosures
  • Low mortgage interest rates – allow for lowering payments on refinance
  • Lenders are flexible to work with those who have been late on their payments
  • Houses are upside down – harder to find properties with equity.


  1. Establish Personal Goals
  2. Research Your Market
  3. Research and invest in necessary Tools and Training
  4. Invest in a personal coach/mentor
  5. Establish Your Real Estate Investing Goals
  6. Put together qualified Power team
  7. Market to develop buyers list
  8. Get financing options in place
  9. Purchase a Pre-foreclosure leads list from reputable list company

While you can often go to your local county courthouse (or visit them online), paying a firm for this outsourced service is a much better use of your time as an investor

  1. Market Yourself (I Buy Houses)
  2. Interact with Sellers
  3. Evaluate Property and Profitability
  4. Develop Exit Strategy
  5. Get into Contract
  6. Rent or Sell it!


Pre-NOD lists may be found and purchased at the following online resources, (The purpose of these references are only to give you some resources to do your own due diligence. I do not endorse these companies and am not getting paid for these referrals. Do your own due diligence…as always).

Wallstreet Lists Mortgage Leads lists
Tranzact Information Services Mortgage Leads lists
Response Makers Mortgage Leads lists
EZ data Group Mortgage Leads lists
Yellow Letters Complete NOD Leads and yellow letters

Now there is so much to know about this market and this article provides a good summary for you to look at this niche. However, I strongly recommend you look to receive more in-depth training and if possible coaching if possible. This will cut your “school of hard knocks” costs down considerably.

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