After you find such a pre-foreclosure home, you can then negotiate with the bank for a loan. Or you could draw up a contract with the current owner stating that you will make all the past due payments and continue to make payments on the house until it sells. Then you can split the profit.



After you understand the owner's circumstances, build a relationship and figure out whether this house can make you a profit. If it can, get creative and make the deal happen.

The safest way to deal with people in pre-foreclosure is to buy the owners out and have them leave. Emotional attachment can lead to a bad deal if the previous owners stay in the home.

If the homeowners insist on staying in the property, lease it to them without an option to purchase. You need to use caution because the previous owners may still be in serious financial circumstances, which means you could end up with an eviction and court battle.

If the homeowners are not willing to be just tenants and have significant equity in the property, offer a partnership arrangement wherein the partnership owns the property. Your contribution to the partnership is the money to pay the back payments due on the loans.

The partnership will lease the property to the former homeowners for rent. If they default on the rent payment, the partnership evicts them. The former homeowners still have a partnership interest, but they do not have possession.

When this happens, you can buy them out of the partnership. As you can read when you're working with this kind of situation it has the potential to get messy. Therefore, the partnership approach should not be approached without the assistance of qualified legal counsel.

Always make sure you have an exit strategy for yourself in case the owners suddenly come across some money. In your agreement or contract, state that if the previous owners pay back all money you laid out plus an additional amount for your time and trouble, you will sell the house back to them. This way, there is no confusion and your profit is in writing. Most of the time this doesn't happen but you always have to be prepared for the worst when dealing with real estate.