2. The media is filled these days with news about
distressed properties. Following is a tutorial on
distressed properties to help you separate some
of the fact from fiction:
3. Distressed Properties Defined:
Contrary to popular opinion,
distressed properties are not
always in bad shape. In fact,
the term “distressed” has less
to do with the condition of the house than it
does with the status of the mortgage. Basically a
distressed property is one that the bank has
foreclosed or for which the current mortgage is
worth more than what the owners are able to
ask when selling.
4. How to Find a Distressed Property:
Finding a distressed property is
actually a simple process these
days. Research indicates that
approximately 25% to 45% of all
properties recently sold may be considered
distressed. With an estimated 300,000 more of
these properties entering the market each
month, it’s a trend likely to continue into the
foreseeable future.
5. Benefits of Buying a Distressed
Property
One of the benefits of purchasing a distressed
property is the ability to save a substantial sum
over the previous selling price. Combined with
historically low interest rates and other possible
incentives, distressed properties offer a unique
buying opportunity.
Lower sales prices
often mean decreased
closing costs, reduced
private mortgage insurance
and even lower insurance and taxes.
6. Cautionary Considerations
Buying a distressed property
isn’t without drawbacks. They
are often sold as-is and may
require substantial repairs or
maintenance. Likewise, purchasing a distressed
property may require more time, especially in
the case of a short sale. Waiting for bank
approval may result in missed opportunities for
other prospective properties.
7. It’s essential to perform due diligence and
understand the total cost of purchasing a
distressed home, including condo or homeowners
association fees. Working with a qualified agent is
one way to save money and protect yourself
against the pitfalls associated with distressed
properties.
