”Distressed property” is a blanket term for homes in foreclosure, short sale or that are Real Estate Owned. These properties are usually sold at 15 to 35 percent below market value depending on the condition of the home. Below are definitions of different types of distressed real estate.
Definition Of Various Distressed Property
- Foreclosure: When a homeowner defaults on their mortgage the bank takes possession of the property.
- Short Sale: A homeowner facing foreclosure may request a short sale from their lender to sell the property for less than what is owed.
- Real Estate Owned (ROE): These properties have gone through foreclosure and are now owned by the bank. Since buyers are scarce a savvy buyer may get the home at a bargain because maintaining an REO is costly for a lender.
All three scenarios offer opportunities for substantial savings, yet all include stipulations with regard to the contract and terms of purchase. When you buy any of the above mentioned properties you’ll be dealing with a financial institution instead of a private seller. Often leading to a lengthy and drawn out closing as lenders want to get the price and aren’t willing to settle. In addition there usually is little room for negotiation on the asking price or other contract terms.
According to the National Association of REALTORS®, foreclosures and short sales accounted for about 16.2 percent of housing sales as of December 2016. These numbers are far lower than the peak of the real estate crisis a number of years ago. Still, there are a lot of these properties around and they continue to be an excellent way to gain equity in a property quickly.
If you are willing to take the chance and be patient, a distressed property could pay off. Most buyers see an increase in the value of their real estate within soon after purchasing. But to avoid the pitfalls and horror stories that some buyer’s face it’s strongly advised that buyers work with an experienced property expert when interested in distressed properties because of the additional paperwork and requirements to complete the transaction.
If you have any questions or concerns about buying a distressed property get in touch with me and I’ll guide you through the process.