What is preforeclosure? Preforeclosure is the time period from which the bank gives notice of default, as soon as the homeowner is approximately 90 days late in payments, to the moment the house sells at auction.

Preforeclosure is moreover the most crucial instance in the foreclosure process. It is during this phase that you as an investor stand to make the largest profits and can literally make thousands of dollars in months, weeks, days, or even hours!

The key to preforeclosure houses is equity. Simply put, equity is the difference between what a house will sell for (fair market value) and what is owed on the house. The entire model to making money with preforeclosures is to buy a house for less than fair market valuing, thus instantly creating equity for yourself.

Here is an example of how this can work. Let’s say someone owns a house with a fair market value of $200,000. Now let’s suppose that this homeowner has lived in the house for several years. If you consider that the property has most likely increased in worth over time, while at the same measure the homeowner has been paying down the mortgage on a monthly basis, it is fair to presume they owe less than $200,000 on the property.

For this example let’s assume that the homeowner owes $160,000. This means there is $40,000 in equity in the house. As an investor, you would want to buy the house for $160,000 or slightly higher. If you can do this, you have a shot at making $40,000.

I know what you are thinking. Why would they sell the house for $40,000 under the marketplace value? Right? Here is one explanation why. If they sell the house to you, you can promise them a quick closing, thus stopping the foreclosure (losing the house at auction).

This will prevent a foreclosure from appearing on the homeowner’s credit record. A foreclosure can stay on someone’s credit for seven to ten years making it next to impossible to get a new mortgage in the future. This is merely one of many reasons.

So let’s say they get rid of the house to you for $160,000. You can turn around and put the house back on the market for the $200,000 that it is worth. Once the home sells, you could put a whopping $40,000 in your pocket. Sounds pretty nice, huh? The greatest thing is there are ways to produce similar deals with little or no money! And that is an example of how you can make money with preforeclosure houses.

In order to acquire preforeclosure houses you first need preforeclosure leads.

This is how you are going to get your leads. You are going to put into action a powerful direct marketing campaign soliciting persons who are in preforeclosure. How do you learn where to start looking?

One of the most valuable sources for preforeclosure leads is mortgage brokers. Almost everyone knows a mortgage broker. Maybe your brother is a mortgage broker. Maybe a good friend is a mortgage broker.

If you don’t know anyone in the mortgage business, network a little bit. I am positive you will be introduced to someone in the mortgage field that can help you.

If not, that is OK too! You will merely have to do a little more legwork. Go through the yellow pages and look for mortgage companies. Start calling around and introducing yourself. See if you can talk to the manager. If not ask to speak to a loan officer.

Ask them if they have someone in specific that handles foreclosure financing. They may or may not. Often times in mortgage companies, they will receive large volumes of calls from distressed homeowners.

These are homeowners who are trying everything to stop foreclosure. The majority of the time, it is too late for the mortgage company to help the homeowner for the reason that their credit is already shot. At this spot the mortgage company may refer them to what is sometimes call a hard money lender. A hard money lender is a lender that specializes in high risk loans. Often times, they are private investors.

This is where you come in. These leads are invaluable. They are homeowners that are exhausting their final options to save their home. What you do is have the mortgage company start to refer these deals to you. If you can get the names and phone numbers of these homeowners, you can contact them directly.

More importantly, you can phone them when they are open to listening and expecting your call. If the mortgage rep that can’t help them gives a high recommendation of you to the homeowner, they will be excited to hear from you.

About the author:

Jason Hornung is the owner of http://www.Buy-fore-closures.Com <http://www.Buy-fore-closures.Com> If you are interested in becoming a foreclosure property investor, visit his site today!

http://www.buy-fore-closures.com