Pursue a Distressed Property? Are you sure it's really Worth Your Time?

By
Real Estate Broker/Owner with Schulenburg Realty, Inc. IL License #471.009970

As a buyer you may be wondering if it is really worth your time to pursue a distressed property.  Foreclosures and Short Sale Homes continue to be the hot topics these days.  Purchasing one of these proerties can present multiple challenges that is not found when closing on a typical home.

Is it really worth your time?

I have had quite a few clients approach me about buying one of these homes.  There is some information I put together below that you may find helpful as you consider whether or not this is right for you.

You will need a lot of patience as these can range from being a big time fixer upper to being in great condition.  They can also receive multiple offers which drives up the price and take a long time to close.  It's also quite possible that the lender can decide to sell it to another bidder which may take you out of the running.

Differences Between a Short Sale and a Foreclosure

In a Short Sale the sellers lender must agree to take less than, or 'short of', what the seller owes on the property.  Even though the property is not owned by the lender, the seller does not have the final say on the price.  The seller may accept and offer that you are very happy with and then months later you find out that the lender counters at a much higher price.

In a Foreclosure the lender already owns the property.  The lender has foreclosed and the seller is long gone and out of the picture.  The owner has already defaulted.  This is also known as an REO (real estate owned) property.

Until your offer is accepted by the lender there is no contract.  It is quite possible that the lender may accept another offer during the time you are waiting for an answer.  The lender most likely will sell the home "As-Is" and not make any repairs.  Most of these properties are already vacant but in some cases the current occupant may still be living there.  The lender may be in the process of eviction.

SUMMARY

  • Be sure to have any home you buy inspected by a licensed professional inspector.  Even though the home may be sold in "As-Is" condition, you should know what repairs may be necessary so that you are informed of what to offer.
  • Affiliate with a good attorney.  He or she will be worth their weight in Gold.
  • Be patient.  This may take awhile.
  • Be comfortable with a little uncertainty.
  • Affiliate with a knowledgeable local real estate agent who is experienced with negotiations.

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As always, when you're ready to buy, sell or finance a home call me at the number below!

 

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Comments (4)

Mike Yeo
3:16 team REALTY - Frisco, TX

I would also add how bad do they want to move in vs buying a good deal. Lots of buyers especially first time home buyer don't understand that.

Mar 15, 2010 03:11 PM
Suzanne Gephart
The ATLAS Group - Medford, OR

Good points! It is so important for buyers to have and understanding of a short sale before getting  involved in purchasing one.

Mar 15, 2010 03:15 PM
Randy Schulenburg
Schulenburg Realty, Inc. - Pingree Grove, IL
Schulenburg Realty, Inc.

Mike,

That is a GREAT point to add.  First time buyers, as well as other buyers, are anxious to move in.  I have noticed how difficult it is for them to wait.

Suzanne,

Thanks.  Buyers need to understand, in a simple way, the pros and cons.  Let the agents deal with the complications.

 

Mar 15, 2010 03:18 PM
Tom Davis
Harrington ERA,DE Homes For Sale, $$ Save $$ Buy Today ! - Dover, DE
FREE Delaware Homes Search!, $$ Save $$ - Find Homes! Delaware Realtor

Hi Randi and Lori,

This is a great post.

Short Sales are a different monkey !  It is best that buyers understand the different processes before pursing them!

Thanks for the posting!

Tom Davis

Mar 15, 2010 03:25 PM