November 8, 2014
Distressed properties are all the rage, and listings are readily available for buyers on the internet to come out and try their luck in the flip businesses, renovating homes and selling for quick profit.
It’s a very rush-rush market out there; with distressed properties staying in the markets for a very short period of time, if you plan on selling your distressed property timing is the key, if you get served with a default notice on your mortgage payments you generally have 90 days to actually do something about it before the ownership of the house falls out of your hand
Selling is only an option if you’re down to around 30% on your mortgage, any other plans to go to sale will possibly result in a short sale of your property which would do the damage of hurting your credit rating as well as merely offsetting your mortgage and not giving you any profits off the top.
The first and most important thing you need to be aware of is which category of distress your property falls in. if it’s just being late on payments that’s a good thing in the sense that there is not actually any physical damage to the property or it has not fallen into distress due to lack of repair and mismanagement.
Let’s look at the legal hurdles of selling your property, the lien of your property is held by your lender, and you are under legal obligation to clear the payments, considering the fact that you have limited time to actually make the sale, you need to go all out and list your property on any and all platforms that specialize in the sale of distressed properties, in some cases you will be required to have a real estate agent handy so you can list in the MLS.
Distressed properties will attract all kinds of buyers, from small homeowners wishing to buy a slightly larger house at a low rate, to businessmen who want to buy a distressed home to flip and put back out on the market, in any case formulating a strong deal will mean you will have to play on your strengths.
You will need to do some research and get a strong concept about property valuation, evaluate your property as well as the issues the property has apart from the nonpayment of mortgage that is causing the “distress†of the property, like any maintenance issues or any repairs that need to be done, add the cost of these to your asking price and include your profit margin, generally an acceptable margin would be around 30% over the final price after repairs.
Make your terms clear to your buyers, and tell them that in case of auction there is a chance they might not be able to procure the property at the same rate because of competing offers, give yourself a negotiating edge by telling any interested parties that you are considering other offers as well, and that you are happy to include the cost of minor repairs inclusive with the house.
Try to get a cheap contractor to get the repairs done, or if you are able to do the work yourself, pull out the elbow grease and git er done , making minor repairs yourself will save you on the costs of hiring a contractor to get that work done, contributing to a stronger profit.
Make sure you mark clear financial terms, and make the down payment you receive equal to the dues you owe to your mortgage company, make the sale, clear your dues and enjoy your profit over the top.