Buying Distressed Properties - Part 2

Real Estate Agent with RE/MAX Allied

Is a distressed property for you? Here are pros and cons of buying one:

Advantages of Buying a Distressed Property
First, you'll be dealing with a highly motivated seller - either a bank in the case of a foreclosure, or in a short sale, sellers who are in financial trouble and very interested in getting out of a mortgage they can no longer afford.

These types of sales take much of the emotion out of the process. You won't be insulting anybody, for instance, if you make an offer that's lower than the asking price. (That's not to say that the low offer will necessarily be accepted, of course.)

Lenders are extremely interested in getting these homes sold and off the liability side of their balance sheets. Many foreclosed properties can be purchased for only a percentage of what they would have commanded five years ago. (This situation is beginning to change, though; bidding wars are breaking out on some foreclosed properties these days, especially those that are moderately priced. It is important to work with an agent that knows what is going on in this area and will be able to help you arrive at a reasonable strategy for making an offer.)

If you're looking at a short sale, you're not likely to get quite as good a deal as on a foreclosure. But there are definite advantages to purchasing one of these homes. For one thing, the homeowners typically still live in the home. Since they want to get the home sold quickly, they are likely to keep it well-maintained and in good move-in condition.

Disadvantages of Purchasing a Distressed Property
If you're looking for a "steal," you may not find it. The market is heating up, with more and more buyers jumping into the market. If you're purchasing a home to live in, you'll often be competing not only against buyers similar to yourself, but against investors. More competition inevitably leads to higher prices.

The transaction process for short sales or foreclosures often takes longer than for traditional transactions. It's sometimes not clear which lending institution actually owns a mortgage loan, and it can take time to get it all sorted out - especially if there's a second mortgage involved, which is often the case.

Some foreclosed properties are also in rough condition. Many have sat idle for a long time with minimal or no maintenance. The departing owners may have sold off fixtures, or damaged the property.

Most importantly, it is critical to work with a qualified real estate agent. Short sales more difficult to execute; but not impossible. Home buyers should be prepared to learn about a new process and should be sure that they work with an agent that is familiar with the process. Try to find an agent with the Certified Distressed Property Expert® (CDPE) Designation to ensure you are working with someone that has undergone extensive training in processing short sales.

Visit my website for Distressed Property Purchasing Tips.


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Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Christina, Thnak you for the post. There are both advantages and disadvantages to buying a foreclosure.Good post.

Feb 18, 2010 11:51 PM #1
Harry F. D'Elia
Real Estate and Beyond, LLC - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

One must be patient when buying distressed property. I represent investors that purchase from the trustee sales weekly. There are some great deals to fix and flip. All great points

Feb 18, 2010 11:51 PM #2
Sally English
The English Team - Atlanta, GA
Sally English Atlanta Real Estate Agent

Great post.  I agree with your analysis.  Best of luck with your offering.

Feb 18, 2010 11:52 PM #3
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