Let’s be frank – buying a property in pre-foreclosure can oftentimes be difficult, given the unfortunate circumstance of the owner.

From an investor’s standpoint however, buying a multi family or commercial pre-foreclosure can potentially offer huge savings, so such properties in distress remain a hot commodity among individuals looking to put their money in real estate.

How to Buy a Pre-Foreclosure

While there are a number of resources for locating residential pre-foreclosures across the U.S., identifying commercial property and land in distress has never been as easy.

In this article, we will reveal a couple of surprisingly easy ways to find commercial real estate in pre-foreclosure and the five steps that can take you from preliminary research to closing a deal.

1. Identify properties currently in pre-foreclosure.

The first step in the process of course, is identifying the actual properties, or leads, that you might want to pursue as an investment.

The best approach is to search for properties that are either off-market or are actively marketed for sale.

To locate off-market properties, you can either use Reonomy’s pre-foreclosure search or sift through local public records. On-market pre-foreclosures would typically be advertised on various commercial listings services, however the options are usually slim.

Finding Pre-Foreclosures With Reonomy

Reonomy can be used to search for multi family, land, or commercial property in pre-foreclosure status within any U.S. market.

You can search within various levels of geography—an entire state, city, MSA, county, zip code, neighborhood, all the way down to an exact street or address.

Reonomy Property Search by Location

You can further narrow down your search within your target geographical area by applying additional filters for specific asset classes and sub-classes.

For example, you might be primarily interested in finding multi family properties in the MSA of Cincinnati, OH-KY-IN that are currently in pre-foreclosure.

In this case, once you’ve narrowed down the location and asset type, you can visit the Debt tab to select properties in a specific pre-foreclosure category and/or auction date.

Reonomy Pre Foreclosure Property Search

If you would like to hone in on even more specific type of assets, you can also add filters for the age and size of the building and lot. Or, you can choose to only see pre-foreclosures in an Opportunity Zone.

Lastly, you can apply filters for sales and debt history, and for specific types of business tenants.

It is worth noting that while all these filters can help you pinpoint the exact type of properties you are interested in, they may produce a very limited list of results, given the low number of commercial real estate in pre-foreclosure at any one point in time.

Cincinnati MSA Pre foreclosure Search

Find Pre-Foreclosures With Public Records

Another way to find commercial properties in pre-foreclosure is to search the local county recorder for specific types of documents.

Many counties make documents like lis pendens, notice of default, and other types of foreclosure land records available through their online search platforms.

Maricopa County, for example, allows you to search by Document Code, where you can select options like “Assignment of Lis Pendens,” “Lis Pendens,” etc.

Maricopa County Recorder Pre Foreclosure

Using public records search platforms is usually more helpful when checking the status of a specific property, as opposed to searching for new pre-foreclosure leads.

Find Pre-Foreclosures Through Real Estate Listings

When it comes to commercial pre-foreclosures, finding properties actively advertised on the market might actually be more difficult than searching off-market.

While residential properties in distress are easy to find with websites like Zillow, foreclosure.com, and RedX, commercial pre-foreclosures are much rarer, and therefore harder to locate.

Bank-owned properties and commercial real estate in pre-foreclosure status can sometimes be found through listing platforms like LoopNet, Tranzon, and LandWatch.

These websites would typically have such assets listed as bank or real estate-owned (REO) properties, or they may simply feature an Auction section.

Pre-foreclosures usually aren’t actively listed and promoted.

2. Find the true owners.

Once you have identified the pre-foreclosure leads you would like to pursue, you need to find out who owns the properties and locate their contact information in order to reach out directly.

This can all be done—whether the owner is an LLC or an individual—within the Reonomy platform.

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When you generate a list of property search results in Reonomy, you can click into any individual listing, visit the Ownership tab, and see the name and contact information of the owning LLC and its affiliated members.

Reonomy Alameda County Opportunity Zone Property Owner

Within that tab, you will find office and mobile phone numbers that you can use to get in contact with the owners and start a conversation.

If you prefer to reach out the prospects in bulk, you can also export your entire list of results, with the option to have the owner contact information broken out separately.

3. Understand the Owner and Their Situation

Initiating a conversation with a pre-foreclosure owner is going to take a bit more ice-breaking than usual. With a phone number in hand however, you can keep a safe distance while still reaching out directly. After all, calling an owner over the phone is definitely less intrusive than the residential door knock.

Because of the sensitive nature of the interaction, it is a good idea to understand as much as possible about the owner beforehand.

For example, an owner who is losing the only property they have—the property they operate their business out of—will be much different to interact with than a member of a portfolio-investing LLC that has a single pre-foreclosure.

Reonomy Salt Lake City Vacant Land Parcel

You can use Reonomy’s building-level, sales, debt, and tenant information to find out more about the owner and the purpose of the property ownership. By analyzing an owner’s portfolio, you can also glean potential reasons for the mortgage default.

Additionally, you can use your interactions to continue understanding the market where the asset is located. This can help you better gauge the risk of investing in the property so that you don’t eventually find yourself in the same situation as the current owner.

4. Communicate and Negotiate

Given the nature of the call, it is very important to be personable, honest, and understanding when negotiating with a pre-foreclosure owner. The interaction should be much more than simply reaching out to make a pitch.

When buying a pre-foreclosure, you can help the owner avoid losing the property for nothing. Do your best to acknowledge the fact that you can both benefit by working together to strike a deal.

Use Reonomy to see the current mortgage and project the likely remaining debt on the property.

Reonomy Property Debt Pre Foreclosure

Then, you can use the platform to see the present day value of the asset.

Not only can you base your offer on these numbers, but you can be transparent with the owner that you have these numbers and you used them to make a fair purchase offer.

By understanding the owner’s situation, the debt they owe, and the current value of their asset, you will be well prepared to interact and negotiate with an owner in a difficult circumstance.

5. Put a Formal Agreement in Place

Once you have reached a verbal agreement with the owner and have secured financing, you should put the agreement in writing, and eventually sign a formal contract.

Typically, the first step in any property transaction is to execute a letter of intent. Essentially, this is a form that spells out the preliminary terms of the agreement, and its structure is used to draft the final agreement.

When dealing with a pre-foreclosure sale, the buyer and seller may also need to fill out a sale addendum.

This document essentially states that this is an honest transaction that is not being done between friends with the sole intent of saving the current owner from going into foreclosure.

The final step of the process is to execute a commercial real estate purchase and sale agreement – a document referred to by the American Bar Association as the “road map” of the entire transaction.

The purchase and sale agreement should be reviewed by each party’s attorney prior to execution.

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