For both home buyers and real estate investors on the hunt for a bargain, a distressed property is an attractive option. As the housing bust has led to more and more businesses and homeowners foreclosing on their mortgages, distressed properties are highly accessible and usually in good condition, providing anyone in the market with low-cost alternatives to purchase a property. So, if a distressed home represents a good option for buyers, what is a distressed property? We’ll answer this question below.
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What is a Distressed Property
What is a Distressed Property?
First, we should mention what is considered a distressed property, as the word “distressed” isn’t actually describing the condition of the property. This refers to any property or home which worth is lower than what is owed on the mortgage, and has owners who neither can nor are willing to continue paying the said mortgage. Considering current economic conditions, properties are usually in good condition, which makes distressed properties an attractive option for those home buyers searching for a bargain.
Types of Distressed Properties
On the market, foreclosures are only one type of all distressed properties available. Short sales, which is another type of distressed property, includes those which were sold for less than the amount that is still owed on them. Another type is Real Estate Owned property or REO. This term is used for properties that have been reverted to mortgage lenders after they fail to sell at auction.
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What is Considered a Distressed Property
Pros of Distressed Real Estate
Besides its low price, what is a distressed property advantage? Even when some tend to be fixer-uppers, others only require some minimal repairs, and some others are definitely ready for their new owners to move in with the fewest hassles as possible, every distressed home can usually be bought at far below market value. Distressed real estate is a common option for investors looking to “flip” a distressed house, which means to get it at a very low price, then increase its value by implementing easy home improvements, and finally, sell it for a profit at market value.
Considerations
A couple of issues should be considered when you’re deciding to buy a distressed home. It’s important to keep in mind that there are different materials homes can be built with, which is highly significant in terms of quality. This is why sometimes many of these types of real estate homes do need serious repairs just to be habitable. Even when banks are sometimes willing to make some repairs to distressed properties, most of the cost of repairs will fall to the buyer. Besides, property values can be reduced by a large number of foreclosures within a single neighborhood. Finally, acquiring financing to purchase a distressed property can be complicated, with preference being given to buyers who are willing to make a cash offer.
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Distressed Home
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