When looking for homes on Zillow, you are likely to find listings termed as “pre-foreclosure”. Pre-foreclosure is one of the property types that is different from a standard for sale or rent listing. Other unique property types includes auction and foreclosure. These listings can be confusing as they are often not available for sale through the standard process of buying a home.
What is a pre-foreclosure?
A pre-foreclosure is a property where the owners mortgage or loan note is in default. Often, the seller has stopped making payments on the loan and the bank or servicer has initiated legal proceedings to take ownership of the property. Until this process is completed, the current owner still owns the property.
What does pre-foreclosure mean on Zillow?
Zillow lists pre-foreclosure properties along side regular listings in the Zillow search results. These properties come from legal filings and represent properties that may become foreclosure properties in the future. In many states, the foreclosure process involves a public auction (often known as a Sheriff Sale) of the mortgage debt and property securing the loan. For this reason, Zillow will list a property as both a pre-foreclosure and an auction.
Can you buy a pre-foreclosure property listed on Zillow?
In most cases, technically a buyer can buy a pre-foreclosure property. These sales are very different, and much riskier, than a standard real estate transaction. The process usually involves a public auction where a buyer will be bidding against both the bank and other investors. Generally the home is still occupied by the former owner and subject to their redemption rights. A buyer will only be able to view the home from the street and will not be able to see the interior of the property prior to purchasing it.
Risks of purchasing a pre-foreclosure property listed on Zillow include:
- Property occupied – needs to go through the eviction process to take possession
- Redemption rights – some states allow the current owner to redeem the property in the future
- Condition issues – the interior condition is unknown and current owners may have done damage to the home
- Title insurance – buying a property at a Sheriffs Sale does not come with title insurance
- Junior liens – there may be additional liens on the property including some (such as IRS liens) that are not extinguished by the foreclosure process
- No financing – traditional mortgage loans do not cover the buying this type of property (cash-only)
Should I buy a pre-foreclosure home listed on Zillow?
Most buyers can not and should not undertake the risk of bidding on a pre-foreclosure home listed on Zillow or any other real estate portal. Some investors have made a great business purchasing these types of properties, however they are adept at the market and the risks included in purchasing a pre-foreclosure property. The benefit of having these properties listed on Zillow is getting a glimpse of potential foreclosure properties which are often listed with a real estate agent and don’t have the downside that is associated with a pre-foreclosure.
Interested in looking at pre-foreclosures on Zillow? Here is a link to Zillow.