Buying homes in pre-foreclosure can be extremely profitable. For the most part, it's a "buyer's market" in the sense that you have more bargaining power than the home owner. Plus, it can be less risky than buying "regular" properties since you are getting a big discount on the true value of the property. If you've played your cards right, you can turn around and sell a pre-foreclosure home for true market value and make a good profit.

This is a very unique buyer's market too! In the past couple of decades, the interest rates were high. Well, not only do we have a ripe number of houses in pre-foreclosure, but the interest rates are low which makes it even more attractive!

That being said, here are some tips for buying homes in pre-foreclosure.

1. Become a specialist in your market(s)

As a pre-foreclosure investor you need to be alert to new foreclosure listings. When a bank issues a formal notice of default to a home owner in default of their home loan repayments, the notice is filed with the count recorder's office in the county in which the property is located. In turn, the home is listed on the various foreclosure listing websites. With other investors ready to pounce on the latest foreclosure properties, you need to be first if you want to give yourself the best chance of sewing up a deal before anyone else. So, instead of trying to monitor the listings in lots of different counties, you may be much better off focusing on those you can confidently keep track of.

An even more important reason to become a specialist in particular counties, is that you'll be better able to assess the market value of the properties you're interested in buying. Your ability to profit from buying a pre-foreclosure home depends on achieving a big enough discount on the actual market value. This is especially the case if your investment strategy rests on selling the property shortly after buying it. Generally, the only way to get a good grasp of market value is to study and become experienced in a particular area.

2. Help, don't "sell", the home owner

Although your entire objective is to buy a defaulting home owner's property... the opportunity to do so will only come after you've convinced the home owner to do business with you.

If there are other potential buyers "circling", who do think the home owner will want to do business with: the quick-talking sales person who tries high pressure tactics to get the home owner to give them the property... or the patient, likable person who wants to help them avoid foreclosure proceedings and will pay them as much money as they're like to get in the circumstances?

Obviously, it's the second type of investor. That's who you want to be. So, when dealing with the home owner -- who is likely to be distraught and stressed about their financial disarray and the imminent loss of their home -- be someone who is "helping" them, not selling them.

3. Get your own financing in order

This may be obvious, but you don't want to buy a foreclosure home that YOU can't afford. While the lure of getting a home for much less than it's worth may be strong, you also need to ensure that you have the right financing in place, and that you can meet any repayments that you may have to make.

In particular, don't assume that you can "take a risk" just because you plan to quickly sell the property after buying it. As indicated by the fall in property values across the nation in recent times, you need to be prepared for a "worse-case scenario" -- such as not being able to readily find a buyer for the home. This is all the more reason to understand the local market in which the home is located and to ensure you have properly appraised its value.

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