All About Distressed Properties
January 31, 2016 | Judith James
Some of the best real estate deals are Distressed Properties
What are distressed properties?
Distressed properties are very attractive buys because they are usually priced below market value. There are many different types of distressed properties. I am going to share 7 of the most common situations that can lead to motivated sellers and thus big big discounts.
1. Death in the Family
A death in the family can lead to a distressed property. If the home is owned by two individuals and one passes away, the remaining person may not be able to fulfil the mortgage commitment on their own. They may put the property up for sale at a discounted price in the hope of getting it sold quickly before they default on their mortgage.
Property owners who have to move quickly due to the need to relocate are motivated to sell their current residence quickly so they are not paying two mortgages. This often leads to a willingness to accept a lower offer than they would have otherwise entertained.
A distressed property often arises due to some sort of financial strain. Whether a job loss, pay cut, divorce, medical condition, or some other financial drain, the owner is no longer able to afford to pay the mortgage on the property. The owner may be eager to sell before they miss a mortgage payment, so they are willing to accept a discounted price for their property to avoid doing so.
The condition of the property often warrants a reduced sale price. Some common property conditions that can lead to reduced sale prices are:
a. Properties That Need Updating- Properties that are in poor condition will not merit top dollar, so buyers who are willing to take on these fixer-uppers can often purchase the property at a reduced price.
b. Properties That Need Extensive Renovation– Some properties need layout changes, additional square footage, plumbing and electrical work, a new roof, changes to the foundation or even a gut renovation. These properties that need more than a few simple updates are often steeply.
c. Property Renovations in Mid-Construction- These are properties with renovations that were started but not finished. For example, a developer buys a property, starts renovating, but runs out of money and is unable to complete the renovation. The developer then puts the property up for sale to attempt to recover some money from it or cut their losses. In these properties, work often needs to be completed before the property is habitable.
5. Partnership Dispute
A distressed property can be the result of a dispute or falling out between two parties who own a property, joint tenants. They may have to unexpectedly sell the property once their relationship falls apart so an interested buyer can benefit from their necessity to sell.
6. A Couple Separating or Going Through Divorce
If a couple who owns a property together separates, the home is often put up for sale. Since both parties are motivated to get rid of the property quickly for emotional and/or financial reasons, these types of properties are often priced to sell quickly rather than to get top dollar for the property.
7. Bank Owned Foreclosure
Properties that have been foreclosed on and are now owned by the bank can often be obtained at steep discounts. The bank’s goal is simply to unload the property at this point. Sometimes these properties need extensive renovations as they have been abandoned for a long period of time.
These examples of distressed properties should give you a good idea of situations to look for that can allow you to get a good deal on a property.
Get a great deal.. Look for distressed properties and buy them at below market prices.