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In non judicial states purchasing properties pre-foreclosure requires some basic guidelines to fulfill its intended endeavor.

Default
An owner stops paying their mortgage payments and after three months are advertised in the paper in the legal section of the county for a period of four consecutive weeks. The owners are not required to be summoned in order for the foreclosure to take place, unlike judicial states where owners leave or abandon their properties ending up in a great delay in foreclosures to take place.

Taking Ownership
Investors have several ways in stopping the foreclosure to take place. This is a win win situation from having the owner avoid credit rating loss to only reflect in their credit as once being foreclosed upon. There are two unique ways in taking ownership to the property. First is taking the property "Subject To". This is exercised in properties that have existing equity of at least twenty percent or greater. In a nutshell lets look at what taking property "Subject To" means. There are two instruments recorded on a home; one is the security deed which is basically your loan or note in promising to pay for the property and that is recorded in the county court house as your property as the collateral. If you stop paying then you give the banks or lender the authority to foreclose and collect what ever funds they could obtain. The second instrument is the General Warranty Deed. This is basically the piece of paper that says who the owner of the property is. Lets say for example you go to Walmart and buy a book. When you pay at the register they give you a receipt; that receipt is your General Warranty Deed showing that now you have ownership to the book and now you are the current owner prior to leaving.

Acquiring property "Subject To" is the owner transferring the title of the property to you as the new and current owner but keeping the security deed of the property in their name. After the transfer you take over payments of the property and you have the right to sell, market, rent, or do anything legally you wish with the property it is now yours. You must bring the account current to avoid the property from foreclosing. If you default in payments in the future you do not get foreclosed upon however the previous owner will. It is not wise to do so considering the amount of money you put in place and the equity you already had when you take ownership try and get an investor to buy or split profits on the property.

The second way to take ownership is to do a Short Sale. A short sale is best exercised in properties with very little or no equity. The process of a short sale involves buying the loan at 80% value of the BPO (broker price opinion or appraisal) Contact the loss mitigation department of the bank handling the foreclosure and ask for a short sale package.

The best two ways to acquire properties pennies on the dollar are through the pre-foreclosure or post foreclosure if the property becomes REO (Real Estate Owned- where no one bid at the auction and the bank took the property back). Buying property at the steps of the courthouse where the foreclosure is actually taking place require full funds to be paid at time of winning the bid and is not the best form of leverage. The other two methods offer financing options, more time, better inspections and creativity can come in play.

Learn more about this author, Joe Safieh.
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