Selling Distressed Property

What is Distressed Property?

When most people hear the term “distressed property,” they think of a rundown building needing significant repairs. However, the distressed property is called that for its financial state rather than its physical condition, though the two often go hand in hand. A distressed property is either on the brink of foreclosure, owned by the bank, or being repossessed by the mortgage lender. 

Whatever the circumstances of the distressed property, it is usually assessed as having a much lower market value if it is being sold. These homes have decreased values because of their physical conditions or the financial challenges the owners face. Real estate agents often refer to both situations as distressed properties.  

Types of Distressed Property

In most states, various entities are trying to sell tens of thousands of distressed properties. The reasons for these properties being labeled distressed vary widely. Here are a few types of distressed properties that could be sold in the real estate market. 

Properties in Need of Repair

It is very common for a distressed property to need extensive repairs. Whether the home needs to be taken care of or the bank has owned it for months and allowed the property to deteriorate, these homes are much harder to sell because of the impending repair costs. 

Individual investors or investing companies often purchase homes that require major renovations instead of real estate professionals. 

Pre-foreclosure and Foreclosure

When property owners fail to make on-time monthly mortgage payments, lenders can initiate a proceeding called foreclosure. If the owner does not pay the owed amount and necessary penalties, the home facing foreclosure risks being possessed by the lender or sold at auction. A home in pre-foreclosure or foreclosure is typically classified as a distressed property. 

However, these are easier to sell on the housing market or popular real estate websites than similar properties with the same label that need extensive repairs. Many professionals pay attention to market trends and conduct a comparative market analysis to decide whether to purchase a property instead of avoiding it altogether. 

Inherited Properties

Homeowners who pass away often name their family members as inheritors of their properties. Passing down assets and possessions to beneficiaries is a complex legal process that could involve ownership disputes. Since no one is living in them to care for them, these properties often fall into disrepair. 

Vacant or Abandoned Properties

When a house is vacant or abandoned, it is more likely to deteriorate and be vandalized. Anyone who might buy it would likely have to invest in numerous renovation projects to make it livable again. Potential buyers for these properties are likely developers or house flippers. House flippers purchase homes far below market price to make a significant profit. 

Properties with Tax Liens or Code Violations

A local government can place a tax lien on a property if the owner fails to pay sufficient property taxes. If the lien is not cured, the government could take possession of the property or hold a public auction to repossess it. 

In other cases, homes may violate local enforcement codes for property standards. In either case, the house would be considered a distressed property due to the financial or legal burdens it is facing. 

Challenges of Selling Distressed Property

It is difficult to find potential buyers for a distressed property. Buyers find purchasing homes that require less work or have fewer legal concerns easier and more appealing. Here are a few reasons why it may be hard to attract potential buyers if you are selling distressed property. 

Buyer Hesitation

Motivated buyers are hard to come by with distressed properties. The typical buyer wants a stress-free real estate transaction, and the unknown of legal concerns or significant repair costs will scare off most people. It is much easier for them to purchase a normal home with no baggage attached to it, which could make the transition difficult. 

Financing Challenges

If someone buys a distressed property, the seller also needs the buyer’s lender to approve the transaction. Lenders will look at distressed properties and see too much risk. As a result, it will be hard for potential buyers to secure financing for distressed homes. 

Time and Expense of Repairs

When selling a distressed property with repair concerns, finding willing buyers who can take on the time and costs required for those repairs will be harder. The seller may have to make unnecessary concessions for traditional property sales. You may struggle to sell the distressed property unless you can find a cash buyer interested in spending a lot of money on repairs. 

Options for Selling Distressed Property

Choosing a realistic price and a motivated buyer is challenging for distressed property owners, but it is not impossible. Even in a seller’s market, your property’s condition or financial status will make it hard to complete a successful sale. Here are some options for facing financial difficulties with your house. 

Selling As-Is to a Cash Buyer

Your best strategy to get a good deal on distressed houses is to find cash buyers. These real estate investors usually have funds to purchase properties with cash, so there is no risk of a lender withholding a mortgage loan. Additionally, many cash buyers allow sellers to ignore any repairs or cleaning a typical buyer would like. 

You can also sell fast to cash buyers because there are no financing delays, and some firms can close a quick sale in weeks. Finally, you can save some money during the selling process by avoiding real estate agent fees. These transactions can be completed without the involvement of real estate agents. 

Short Sale

A short sale is another option for selling distressed property. With this strategy, the seller and lender agree to sell the property for less than the remaining loan balance. This means the home will be sold for far less than its fair market value, but the seller won’t take as big of a hit to their credit history as a foreclosure would. 

Auction

A distressed property could be sold at auction in some cases. This is a public transaction where the home will go to the highest bidder. However, the property could be sold competitively, so you shouldn’t count on getting a fair price unless it is a strong seller’s market. 

Working with a Real Estate Investor

A distressed property is a great candidate for an investment property. Some investors may be willing to buy your home for a lower price, helping you resolve your financial strain or legal trouble. These entities, often cash buyers, will likely invest in renovations to rent the property out.  

Benefits of Selling a Distressed Property to a Cash Home Buyer

Since getting full market value for your distressed property is unlikely, your best option is selling to a cash house buyer. There are numerous advantages to selling your home to a cash buyer. 

Speed and Convenience

Speed is the key to selling a distressed property and eliminating the concerns it causes you. Cash home buyers can close in a matter of weeks once you accept their offer, and there is no need for showings, open houses, staging the property, or making repairs. 

Financial Relief

Selling a home to these real estate professionals will also help relieve financial trouble. You will receive cash for the property quickly, which can help reduce other debts or fund your next move. A foreclosure on your home can lead to additional financial hardship due to the credit score effects, so selling quickly will help you avoid foreclosure. 

No Fees or Commissions

Since no real estate agents are involved in the transaction, you can save thousands of dollars on commissions. Typically, these rates would cost you 5-6% of the property’s asking price. If fees are involved in the transaction, they will likely be deducted from the cash offer. 

Choosing the Right Cash Home Buyer

There are many cash home buyers in the real estate market. You should assess multiple options before accepting the first cash offer you receive. Here are some tips for choosing the right buyer when selling a distressed property. 

Reputation and Experience

When dealing with multiple selling options, you want a buyer with experience purchasing distressed homes. Look for online reviews and research the company’s length of business to determine if the cash buyer has a positive reputation. 

Transparency and Fair Offers

Transparency is huge during the selling process. You need a buyer who will be honest about your options, even if that means recommending a traditional sale. Ask about the company’s communication methods before accepting their offer and measure their level of transparency against the other buyers. 

Sell Your Distressed Property As-Is Now!

A-List Properties has the experience needed to handle your distressed property. We can close deals in 14 days or less and will take your property as is. Once you accept our fair cash offer, feel free to skip those repairs and leave unwanted possessions behind.If you want to sell as is to a fair and transparent buyer, call us today at 972-526-7042 or complete the online form.