One of the longest standing difficulties in CRE for brokers, lenders, and investors, has been the inability to easily research the debt on commercial properties that may not be listed and find out whether or not they’re likely to sell or in pre foreclosure.
In this article, we’ll take a look at the easiest ways to search and find properties that are currently in pre foreclosure, as well as how to access ownership details and contact information.
Table of Contents
- What does pre foreclosure mean?
- How does pre foreclosure work?
- How do you find pre foreclosures?
What does pre foreclosure mean?
When a property, commercial or residential, is in pre foreclosure, that means that it’s in the process of being repossessed by its lending entity. Pre foreclosure is caused by an owner’s inability to pay outstanding debt owed on the property.
Essentially, the pre foreclosure period is one of warning. It is the period in which a property is at risk of being foreclosed on because a property owner has gone into default on their mortgage payments.
How does pre foreclosure work?
Once the owner of a property does not pay the agreed upon mortgage for an extended period of time (usually 3+ months), they go into default on their debts.
Pre foreclosure will not come about after a first-time single missed payment.
When the owner goes into default on their loan payments, they enter into the financial limbo known as pre foreclosure.
How long is the pre foreclosure process?
The length of the pre foreclosure process can vary from state to state.
For commercial properties, the pre foreclosure process can take as little as 3 months or as long as a year. It will depend on state law as well as the owner’s intended means of removing themselves from the process.
Investopedia states that the residential pre foreclosure process can last anywhere from 3 to 10 months.
What options do property owners have during the pre foreclosure process?
In the time between pre foreclosure being initiated and actual foreclosure, commercial property owners and homeowners have a few actions that they can take to rid of their debt and propel the property out of default.
1. Repay Their Debts
A borrower of any kind, of course, always has the option to simply make up their debts and pay of what is owed.
When it comes to real estate, this may require some life-changing events to have to occur in a short amount of time, and thus could be extremely unlikely and difficult.
Those that do not have the budget still have a few options that bear a bit of forgiveness and help them avoid foreclosure.
2. Sell the Property
A common way for owners to avoid foreclosure is to list and sell the property. In this case, the sale proceeds can be put towards unpaid debt—whether paid in full or not. In the case of a short sale, the sale amount will be less than the debt owed.
According to Investopedia, a short sale is, “a transaction in which the seller does not actually own stock that is being sold but borrows it from the broker through which he or she is placing the sell order.”
Regardless of the exact case, selling the property offers owners a way to avoid foreclosure, and potentially make a few dollars in the process.
3. Refinance or Modification
While it may depend on the regulations of the lender, another option for property owners is to refinance or modify the loan they already have in place.
Given the lack of wiggle-room that a borrower has after going into default, this is not a super common occurrence.
Depending on the borrower’s standing, however, and the regulations of the lender, there is a chance that they could modify the loan currently in place. Furthermore, if it is a matter of new financial distress or an outlying case, the borrower may be able to refinance a new loan to pay off the old debt.
What pre foreclosures mean to CRE professionals?
For property buyers, pre foreclosure properties often come at a discounted rate, thus presenting an optimal investment or business purchasing opportunity.
Finding even a single commercial pre foreclosure to buy could be the opportunity of a lifetime for an investor or business owner.
For lenders, pre foreclosures signal the possibility of refinancing. At the least, because this does not happen at high rates, a lender could take the owner information on a property to check whether or not they’d be likely to default on another loan.
How do you find pre foreclosures?
Whether you’re an investor, broker, lender, or business owner, searching for pre foreclosure properties can be quite the hassle for two main reasons:
- The time it takes to find information on pre foreclosures.
- The difficulty of getting into contact with owners at the right time.
Even if the data you’re accessing is accurate, that may not always mean that it’s up-to-date. And it certainly may not be easy to find.
When it comes to using that information as an opportunity for investment or refinance, then to get in touch with the owner, the freshness of the information becomes imperative.
With the right tools, you’ll be able to find up-to-date commercial and residential pre foreclosures with ease in reasonable amounts of time.
Among the tools you should scope out for finding pre foreclosures are Reonomy, Public Records, and online listings websites.
Reonomy Pre Foreclosure Property Search
When running a property search on Reonomy, in the Debt tab of the platform, there are filters that can be added to find multifamily, land, and any other commercial asset that is currently in pre foreclosure.
Search for properties currently in pre foreclosure.
Filters include “Auction date” and “Pre-foreclosure category.” You can search for properties with an auction in the next two weeks, month, three months, or add a specific custom date range.
Pre foreclosure categories include “Final Judgement of Foreclosure,” “Lis Pendens,” and “Notice of Defaults.” You can also search for all of these categories at once.
You can search for multifamily properties in pre foreclosure, as well as land, office buildings, industrial, retail, mixed-use, and more. Your property search can start with an asset and its building and lot sizes, or with its mortgage status—whichever you prefer.
Analyze those properties.
Once you see a potential property of interest that is currently in pre foreclosure, you can dive into that property’s profile page to analyze it in-depth.
See any property’s sales history, debt history, building and lot specifics, ownership details and owner contact information.
After you run your property search, you can visit the profile page of any property, then visit the Debt tab. In that tab, you’ll see any current pre foreclosure records, as well as the mortgage history of the property.
Access the contact information of owners and reach out directly.
Upon seeing the ownership information of those properties, you can access the contact information of the owners, which includes the ability to pierce the LLC and see the individuals and members of the corporation.
All in all, with a single platform, you can search and find multifamily, land, or commercial pre foreclosures in any market in the U.S., see the pre foreclosure records, sales history, debt history of those properties, then access the contact information of the owner to reach out directly.
Pre Foreclosure Listings
As we mentioned above, one of the options for owners in pre foreclosure is to list the property and sell it, then use the profits to pay off the existing debt they have with the mortgage lender.
For those on the investing-side of the equation, pre foreclosure listings are a place to turn to when looking for pre foreclosures that are actively being sold.
Given the fact that most pre foreclosures in the U.S. are for homes, the listings platforms below are for residential properties only.
Foreclosure.com is one of the biggest source of U.S. home pre foreclosure listings.
On their site, they have more than 350,000 property listings, including almost 180,000 pre foreclosures, as well as short sales, sheriff sales, foreclosures, city-owned, bankruptcies, and more.
Upon searching a property and visiting its profile page, you can see the exact stage that the property is in, from “Not in Foreclosure” through to “Bank Owned.”
Foreclosure.com also provides a number of other informational resources and tools, such as their “Credit Information Center.”
The site has listings in every state nationwide, presenting a clickable map on their homepage that you can use to pick the location of your pre foreclosure search and dive in further.
RealtyTrac also offers pre foreclosure home listings across the United States.
When searching within a specific county, you can see auctions and bank-owned properties, pre foreclosure homes currently for sale, and pre foreclosure homes that were recently sold.
REDX is a residential lead generation platform that gives you the ability to find homeowner leads that are currently in pre foreclosure.
The added benefit of this tool is that they can also give you access to homeowner contact information. REDX comes at a cost of $39.99 per month, whereas the aforementioned sites can be used for free.
Many pre foreclosure sites also offer listings of properties that are already under ownership of the lender, but did not sell at auction.
When it comes to finding any type of property or ownership information, public records are always an option—online or in person.
If your local county clerk offers an online search platform, you might be able to use it to find pre foreclosure records online.
If not, you can always take a trip to the county clerk’s office or call them on the phone. These options can be a bit time-consuming, however, especially when considering the alternatives. On the bright side, however, they will bring you the most accurate information available.
Reach Out to Lenders
Another option to get information on pre foreclosure properties is to reach out to the lender of the loan on the property.
You can use Reonomy’s property debt information to find out who the lender is on a multifamily or commercial property or land parcel before reaching out.
On any property, visit the Debt tab of a property and see who the most recent lender is. From there, if need be, you can reach out directly to the lender and inquire about the property or property owning entity at-hand.
Regardless of why you’re looking for pre foreclosures, finding the information you need with ease and in a timely manner is not possible without the right resources.