Preforeclosure investing is one of the most lucrative financial vehicles you can leverage to build wealth very quickly. In this market where are seeing a surge in foreclosures, opportunities to make huge profits are more abundant than ever. Here are some frequently asked questions (FAQs) about the world of preforeclosure investing.

1. What is the difference between preforeclosure investing and other types of foreclosure investing?

There are three phases in every foreclosure lifecycle:

? Preforeclosure: The period after which the mortgage company has filed a Notice of Default legal notice in the newspaper or a Lis Pendens lawsuit in the county court and before the house goes on sale at a foreclosure auction. Investors can negotiate directly with homeowners to buy the property and stop the foreclosure auction from taking place.

? Foreclosure auction: The house goes up for sale at a public auction where investors can bid and pay cash to buy a house as is.

? REO: The house becomes "real estate owned" by the bank if nobody buys the house at the auction. Investors can submit an offer to the bank to buy the house directly from them.

2. What are the advantages of investing in preforeclosures over the auction and REO phases of investing?

At this phase, you have the opportunity to negotiate directly with homeowners, giving them an opportunity to salvage their credit, preserve their dignity, and walk away from the home with a clean start. Otherwise, the homeowner would have to face a forcible eviction by the government after the auction. You are there to help create a win/win solution that is mutually beneficial for the homeowner and for yourself. Because you are investing with a homeowner in need, you have greater room for flexibility and negotiation, and the greater potential to take ownership of a house with more equity than in the other phases. There is also less competition from other investors at the preforeclosure stage than at the other stages, because this stage requires you to have the courage to actually talk to homeowners, either in person or on the phone, and face your fear of rejection.

3. How do you negotiate with homeowners? What do you say to them?

When you introduce yourself to a homeowner, you tell them that you understand they are going through a difficult time and are in jeopardy of losing their home, and are there to help them find a solution. At this point, the homeowner may either hang up on your or slam the door in your face, or her or she might be receptive to hear what solutions you have to offer. But remember that the last thing that a homeowner wants is for some greedy shark coming to their doorstep and asking blatantly to buy the house. For a homeowner, facing foreclosure is a very humiliating and tragic experience. Imagine if you were about to lose your home and you had nowhere to go, the bank doesn't want to negotiate with you, and you have poor credit, and no job. But you are sitting on a house in dire need of repairs, with $40,000 equity in it. How would you respond to someone knocking on your door? Can you find someone who is open to selling their home to you? Absolutely yes. But you may face a lot of rejections before you find that one homeowner who is willing to work with you to find a solution.

4. How do you stop foreclosure?

There are many ways to stop the foreclosure process:

? The homeowner sells you the house through a traditional closing. The mortgage gets paid off. The homeowner walks away happy, possibly with some cash (depending on how much equity there is in the house), and you walk away with a house ready to fix and flip, or fix and rent out.

? The homeowner deeds the property over to you, and you take the property subject to the existing loan and reinstate it. In this circumstance, the title is being transferred to you, but the mortgage is still in the old homeowner's name. At this point, you don't pay off the loan but you simply reinstate it, by paying the minimum amount past due to bring the account current.

? The homeowner can file bankruptcy, but in this case the house cannot be sold to you during the bankruptcy proceedings. Once the bankruptcy proceedings are over, the homeowner is free to sell the house.

? The homeowner refinances the mortgage.

Obviously, the only way for a preforeclosure investor to make money in any of the above four scenarios is if the first two of the four methods above happens. But in the business of preforeclosure investing, if you want to be successful, you have to gain the homeowner's trust.. That can mean that you may end up helping the homeowner save their home. Remember that most homeowners will do everything in their power to keep their home rather than try to sell it to you. Handing over the keys to the house is perceived by them as a last resort.

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