Before a bank actually takes back a property during a home foreclosure; a period of time must be served in which a public notice is given. This is known as a pre-foreclosure and it is your best opportunity to begin reaping the huge profit potential available in this sector of real estate investing. It is easy to locate pre-foreclosures because banks must publish significant details related to the pending foreclosure for the public auction that usually follows.

Why is it better to take advantage of this situation at pre-foreclosure rather than waiting until the property has actually been foreclosed upon by the bank?

This is a golden opportunity for you, first, because it means that if you are able to convince the homeowner to sell the property to you rather than waiting out the foreclosure you can avoid haggling for the property when it goes up for public auction. You see, if the homeowner is unable to come up with the cash to make the mortgage current then the next step will be for the property to be sold at public auction. This means that you'll be bidding against several other interested parties and there is a chance that you may lose out altogether or else have to pay more than you need or want in order to obtain the property.

Secondly, when you attend a public auction you need to basically have cash in hand or be able to put your hands on the money in a very quick fashion. When you deal directly with the seller you have a little leeway here. You don't necessarily have to walk in with a cashier's check.

In some cases the bank will actually purchase the home back at the auction and then they are stuck with trying to sell it after the fact. This is not a desirable situation because it is usually not in the bank's best interest to make it a well known fact that they have foreclosures. While they need to get rid of the properties for financial reasons, it is simply not good publicity, to make it known that they have foreclosed on someone's home. This can make it more difficult for you to deal with them. In addition, the bank will be incurring fees every day they hold the property and you may end up paying more money than you would have if you had been able to attain the property directly from the homeowner.

About the Author:

Sal Vannutini is the creator of Foreclosure Wizard. Dramatically increase your foreclosure investment profits, with one, easy to use software program. Get your free special report: http://www.foreclosurewizard.com