Opportunity Is Knocking
Your guide to the ins and outs of finding a good deal in today’s market
But even so, why would anyone seek out a distressed property?
Price is the biggest motivating factor. Short sales and bank-owned properties sell for an average of 20 percent below market value, and sometimes much more.
Realtors have reported that 10 percent of all homes sold
in the United States in 2014 are “distressed properties".
What do I need to know about buying bank-owned or pre-foreclosed property?
- Often, distressed properties are in excellent condition and in very desirable locations. Homeowners in every price bracket are affected by the economy.
- Bidding wars happen in some markets, but they mainly occur in the most distressed ones. As in any market, the most competitive offers are most likely to win.
- The key to streamlining the loan process and avoiding surprises is to work with an experienced real estate agent and a lender who regularly handles distressed property transactions.
- The timeline for short sale transactions is tightening and REO transactions tend to occur within a faster time frame than the traditional home-buying process.
- Foreclosures are happening in record numbers and sellers are very motivated.
Distressed properties fall into two broad categories:
- Foreclosures or REOs (real estate owned), which have become the property of the bank due to the homeowner failing to pay the mortgage for several consecutive months.
- Short sales or “pre-foreclosures,” where agents negotiate with banks to accept a sales price and loan payoff that is less than the mortgage amount. Short sales occur in instances where home sellers are “underwater” on their mortgage, which means that the amount of their current mortgage exceeds the market value of the home.