Buying Distressed Properties

What is a distressed property sale?

Homeowners have experienced the worst downturn in the market since the Great Depression. Due to job loss, declining market values, job loss and relocation, the country has seen a huge amount of distressed properties on the market.

Let us explain the differences in each:

  1. Short sale: This is a negotiation between the seller and the lien holder. The seller (current homeowner) owes more than the home is worth. The lien holder requires that the seller have it on the market with a REALTOR and actively market it through the Multiple Listing Service (MLS). Once an offer is received and the seller accepts its terms, the contract is sent to the lien holder. The contract is contingent upon the lien holder meeting a net number that they’ve agreed upon with the homeowner/seller. You can typically get a very good deal on a short sale. However, the timeline can be very long and time consuming. Some may never come to fruition because the lien holder either won’t agree to the loss or won’t approve it timely and the buyer has to make other choices.
  1. REO/Lender Owned: This is a true foreclosure – meaning the lien holder has taken possession and is the current owner on the Deed. Typically REO’s can close quickly because the lien holder has already provided a list price by having had the home appraised. A 30-day closing is not unusual on the properties. One of the misnomers on foreclosures is that you can make very low offers and get them. Remember, these homes are already discounted. Don’t shoot yourself in the foot by making an unreasonable offer to the lien holder. They know what it’s worth – they’ve already had it appraised.
  1. HUD Owned: HUD homes are available for anyone to purchase as long as the potential homebuyer can pay in cash or has the ability to qualify for a loan. Each home has an initial priority period in which the home is offered strictly to buyers that will be utilizing

HUD sells its homes through a bidding process and you will need a HUD certified Realtor like Lapham Realty. The initial stage of this process will allow us an offer period to submit sealed bids on your behalf. After the initial period has concluded the organization reviews the offers and typically accepts the highest bid.

In addition, you should keep in mind when purchasing a distressed property that it is sold “AS IS”. Sometimes the utilities aren’t even turned on. If it’s in the winter you may need to get it de-winterized, turn the power on, turn the water on, etc… to have your home inspection. The lien holder will allow you 10-days to get your inspections completed.

Where to look for Distressed Properties online?
Most short sale and for sale properties are available online through the MLS system. Most websites you find on your own or have to pay to see online are a waste of your time and money. Many will never actually become available. We recommend the following websites:

 

Need help finding a lender? Lapham Realty recommends these lenders to work with. Find other helpful connections under Buyer Resources.