Pre-foreclosure is a term used to describe owners who are on the verge of losing their property but aren't quite there yet. Maybe their payments aren't late enough for foreclosure proceedings to kick in, or maybe they've worked out a temporary agreement with the bank to stall the foreclosure process. Some of them will recover, but for many others it's just a matter of time before the property is lost. That's where investors step in, working a deal to help an owner salvage at least a part of his good credit and at the same time buying a property that can be sold or rented for a profit.

One problem with many owners who are facing possible foreclosure is that they are in denial — they don't believe it will really happen. They are too embarrassed to talk to anyone about their problems, even their lender. Those are the owners who find themselves in foreclosure quickly — unless their finances turn around — because they aren't asking for help.

You can't pluck these people out of thin air. Finding them is usually best accomplished by word of mouth. If you're new to the game, it will take awhile to get the word out that you are looking for properties. Make yourself known in neighborhoods where you are interested in buying. Think of the networking that a real-estate agent does and mimic it. Tell everyone from grocery clerks to auto technicians to bank tellers that you are searching for real estate. Eventually, someone's brother, sister, aunt, or uncle will tell a potential seller about you. It takes time, but you have to start somewhere, and it might as well be now.

After Foreclosure Is in Motion

Foreclosures that have been filed in public records are easier to locate, but at that point, other investors have found them, too. The earlier you discover the filings, the more time you have to research the properties and negotiate with the owners without competition from other investors.

The clerk of court at your county courthouse can give you a list of upcoming foreclosure sales. Another source of foreclosure information is the legal filings section of the classified ads in local newspapers.