What is a distressed property

A Distressed property is one which is set at a low price for sale by the mortgage company, when a borrower fails to make payments on their mortgage the company lists the home as a distressed property; it could be for other reasons as well, such as non maintenance, or severe damages to the property.

Distressed properties are generally brought for two main reasons, either personal or financial.

People who cannot afford to buy new bigger home but need to extra space generally seek out distressed properties in reasonably good shape to live in, this falls in our personal need category.

People who acquire distressed properties to refurbish them and increase value and put the homes back on the market (flip property) fall in our financial need category.

How is Distressed Property Sold?

If a borrower fails to pay their mortgage for at least 90 days the mortgage company, lender or bank takes possession of the property, immediately and initiates the foreclosure process.

Lenders or Mortgage companies usually take help from local real estate agents, however banks, usually don’t like to get their hands tied up in long and lengthy deals, usually banks set up auctions to get rid of the distressed property.

If a sale is not made on auction for some reason the distressed property is made available to the public in an open house.

People can directly buy distressed property from the bank, mortgage company or a special lender, due to the high demand of distressed property, and the advertising practices that mortgage companies and special lenders employ in getting rid of distressed properties, the houses get sold off usually within a week of being listed, so if one is interested in a listing one should act fast.

Distressed Property Business

Turn on the cable or skim through any channel, you’re liable to come across a blurb or a whole show about home refurbishment or flip property, it seems like everyone’s on this distressed property business, and why wouldn’t they be, sure there are risks in every business but it’s one of those few businesses that can actually give a strong calculated profits.

People usually have a hard time in deciding in getting into the distressed property business, but there are certain factors that actually make it a good move for investment.

1. Valuation of the property fluctuates with time, a person who can keep a good eye out on the market and has multiple distressed properties listed for sale could possibly make a great income in selling distressed properties at the right time when the market is high.
3. Once a property is marked as distressed, there are already bound to be damages or problems with the home due to neglect, it won’t matter if it stays that way as you can include minor repairs to sweeten any deal you get, so essentially there’s no actual maintenance cost when we talk about after procurement expense, except for probably the odd trip out to the property to check out if everything’s the way it’s supposed to be.
5.   If you can invest in minor repairs you can flip your homes and sell them for a better price, it’s even possible in some cases to sell the refurbished distressed home for full retail value.