No doubt you’ve heard a lot about all the Distressed Properties on the market here in Boise (and frankly in most of the country). But what is a distressed property exactly? And what does it mean for you; if anything?
The narrowest definition of a distressed property would be any property that is in the foreclosure process or is about to go into the foreclosure process. The homeowners either bought more house than they could afford or, more likely, have had a hardship which makes it impossible to keep up on their mortgage payments.
These distressed properties, or more accurately their homeowners, are faced with the devastation of a foreclosure where the bank repossesses the home in order to sell it and cover the amount of the outstanding loan on the property. Many of these homeowners seek to sell their home before the foreclosure to avoid this outcome.
However, many homeowners actually owe more on their home than their home is currently valued and thus are unable to sell it. In these cases many home owners begin to negotiate with their lender (most likely with the help of an experienced Realtor) to sell the property “short” of what they owe on it. Or as its commonly called, a Short Sale.
The broadest definition of a distressed property includes homes that are in foreclosure or about to go into foreclosure, short sales and all properties that have actually been repossessed by their lender, or Real Estate Owned (REO) properties (commonly called Bank owned properties). These properties are only distressed in that the lender doesn’t want to be in the business of owning private residences. In many cases, investors also consider a property that is in disrepair, but owned by an individual, a distressed property as well. I do a weekly (-ish) post here on the blog featuring these types of properties.
Buying Distressed Property
- Can be a great opportunity to find property that is slightly undervalued to the market.
- These properties are often sold “as-is” and are in need of repairs both small and sometimes big.
- Are never as simple to close as your more traditional properties and require patience on your part!
Selling Distressed Property
- Get the help of an experienced Realtor as soon as you can to go over your options.
- Seriously, I’m not just saying that. Its your best opportunity to have a bad situation become a better situation.
- Find someone who is both knowledgable AND who you feel good working with; its a long process.