Pre-foreclosure simply refers to a property that is in default for any loan attached to it (mortgage, second mortgage, tax lien, etc.). This status is applied until the defaulted amount, plus any associated penalties and fees, are paid or it is officially relinquished.

There are a couple of strategies to use when buying pre-foreclosures:

• Approaching the property owner in default.   Use empathy as this person may be in a distressed situation (job loss, divorce or illness among others).  Or perhaps the owner has tried to make a property improvement that resulted in the value being less than the mortgage, so he/she is in default. Make a reasonable offer or consider a sub-lease option to help their situation. Attempting to take advantage of the person will often terminate a business proposition, so consider negotiating terms to make you stand out from others trying to win the property. Acting quickly is oftentimes the key.
• Contacting the agency foreclosing the property.   Short sells occur when a lender sells the property for less than the balance due to recoup past payments and have a reliable owner taking over payments. It may be tough to convince a lender to take this option due to a robust real estate market that nearly guarantees a profit.