Foreclosure is a legal process that a lender initiates after the borrower fails to repay the loan as per the terms of the contract. The lender initiates the foreclosure process to reclaim the possession and ownership of the property. If the borrower misses three consecutive monthly payments(state specific), then at the end of the 90th day or third month the lender will file a "Notice of Default" at the county recorder's office.

The opportunity to buy a pre-foreclosure property opens the day the "Notice of Default" is filed. The opportunity ends on the day the property is sold at the auction. The time between these two events enables a buyer to work with the homeowner and the lender to negotiate and structure a deal that could be a win-win deal for everyone. This is the only time in the entire foreclosure process where the buyer can use conventional mortgage, hard moneylenders or creative financing techniques to buy the property.

When a borrower defaults on mortgage payments, the original lender takes back the property and sells it at auction, often at a seriously discounted price. But just like a repossessed vehicle auction, he resale of the property is done on a caveat emptor basis: Let the buyer beware, buying a home in auction is not for the faint of hearts and it's certainly not as easy as it seems.

Buying at a foreclosure auction all too often means buying blindly.The title of the home can be (and should be) examined before the sale, but that is the extent of the paperwork involved, and a purchaser is basically buying with no idea of any preexisting conditions the home may have. An interior inspection before the sale is a luxury that does not happen often and shouldn't be expected. The same goes for any paperwork aside from the title. For all you know, your foreclosed, discounted gem may very well be under a lien, second mortgage, or court claim that you know nothing about. Although you should be legally protected from liability in most instances, it's a toss-up situation, and youmight not know what you're getting yourself into.

Foreclosure purchases also require cash in hand. This is a big one for most people, unless you happen to be sitting on a serious chunk of change. No mortgages or financing is offered on a foreclosure purchase. You pay once, you pay it all up front, and you buy the foreclosure property as-is.

What does it take to succeed in Foreclosure & Pre-Foreclosures?

Foreclosure and Pre-Foreclosure investing requires a lot of experience, knowledge and perseverance.