A distressed property is a home that is usually in poor condition and is being sold at a discount. The term is most often used in the real estate industry to describe foreclosed homes or homes in danger of foreclosure. However, since it is an umbrella term, there are variations of distressed property people should know about, and here are some examples.

1. REO Properties

REO is short for “real estate owned.” REO properties are homes that have been foreclosed on by the bank and are now owned by the bank. Banks are not in the business of being landlords. Therefore, they become motivated to sell these homes quickly.

As a result, they will sell them for less than market value, presenting an opportunity for savvy investors to purchase these homes at a discount. If you’re prepared to act quickly and pay cash, investing in bank-owned homes can be a great way to get a great deal on a property.

2. Foreclosures

Foreclosures are homes that are in the process of being foreclosed on. They are in the early stages of the foreclosure process and are not yet owned by the bank. It means that homeowners are still living on the property.

However, they are not making their mortgage payments and are falling behind on their mortgage. As a result, they face the threat of foreclosure. Foreclosures present an opportunity for investors to purchase a property at a discount.

3. Short Sales

Short sales are homes that are being sold for less than the amount that is owed on the mortgage. The homeowner is in financial distress and is trying to avoid foreclosure. While this can be an excellent way to avoid foreclosure, it can also be a complex process.

The owner will sell the home for less than what is owed on the mortgage to pay off the debt and avoid foreclosure. Short sales present an opportunity for investors to purchase a property at a discount. The proceeds will go to the lender to pay off the remaining balance on the mortgage.

Risks of Buying Distressed Property

There are some risks that you will need to consider when you are buying distressed property. It is essential to be aware of these risks before you make an offer on a property. If you are considering purchasing a distressed property, it is necessary to do your research and work with a qualified real estate agent.

1. Title Issues

There may be some title issues with distressed property. The property may have been foreclosed on in the past, and there may be some outstanding liens on the property. It is essential to have a title search done to ensure exceptional liens on the property.

2. Property Condition

The condition of a distressed property may not be known. The property may have been vacant for a long time, and the state of the property may have deteriorated. It is essential to have a home inspection done to make sure that the property is in good condition.

3. Process Length

The process of purchasing a distressed property can be lengthy. The property may be in foreclosure, and it may take some time to get the property. It is essential to have patience when purchasing a distressed property.

Conclusion

There are many reasons to purchase a distressed property. For some people, it is an investment opportunity. Others see it as a way to get a home at a discounted price. But whatever the reason is, investing in distressed property should yield excellent results.

Evergreen Investments is a group of real estate investment specialists helping property owners get the best deals possible through world-class advisory and transaction services. We aim to help our clients achieve financial independence by teaching them the ropes of apartment investments. Learn more about real estate investing by reading on our website today.