What is a distressed property sale?
A distressed property usually is a pre-foreclosure, REO (Bank Owned) property or a HUD home. What all these homes have in common is they have a monetary obligation to the current mortgage lender that must be met. Meeting the obligation within the context of the sale can be handled a number of ways.
Timelines can be very lengthy and tricky and many times the wait and process will cause more of a disappointment than it’s worth. You must understand going into purchasing one of these properties that ALL properties are sold in “As Is” condition. Before looking at one of these properties, make sure you are realistic about what you expect and your time line in closing.
Below are more details on each type of sale.
Pre foreclosure, or short sale
This is when the seller cannot make enough money on their home to pay the balance owed to the lender or lenders. The seller makes an arrangement with the bank to accept less than they owe. This can be arranged a number of ways between the bank and seller. All short sales are different and all banks handle them differently. In general, the biggest headache of doing short sales is the timeline. I have made offers to banks that have taken anywhere from a week or 4 months! AND this is just to get a response. A lot of the prospective buyers lose interest or simply need to move before the process can be completed. Most of the time, not always, the buyer may end up getting a good deal through a short sale, but it is never a guarantee and many never even see the closing table.
REO or “Real Estate Owned”
This is a home after it has been through the foreclosure process. It is a home owned by the bank. It is usually a little bit easier than a short sale. With bank properties, it all depends on which bank owns the property. If they are local, you might have a smoother transaction since things are being done on a much smaller scale. However, if it is a large bank like Bank of America, etc., expect not only a long turn around but a bit of smoke and mirrors to boot. It can be a bit ridiculous.
These homes are owned by the Government. These homes are all sold through the HUD site. All HUD homes are offered for sale at fair market value, based on a recent appraisal. The homes are available first to only owner occupants. If you buy a HUD as an owner occupant, you must occupy the home for 1 year. You can also only buy a HUD every 2 years, regardless or being Owner occupant or Investor.
If no bid as been accepted by HUD, on the 31st day it is listed, Investors will be allowed to also bid.There are also special financing options, specific to HUD homes. View HUD properties at www.hudhomestore.com. Find one you like? Contact me to submit a bid for you!
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. I recommend the following websites.
- www.eastnashvilleagent.com (Home page of this site includes a link to the Realtracs system)
Here’s some great information to know if you are using Zillow or Trulia to search for properties. For more information call Andra Brewer at 615-585-2638 and take a look at all the resources for buyers on the site.