What is a distressed sale?
A distressed property usually is a pre-foreclosure, REO property or a HUD home. All these home have some sort of monetary obligation to meet and can be handled a number of ways. Time lines can be very lengthy and many times it will cause more of a disappointment than it’s worth. All properties under this criteria are in “As Is” condition. Before looking at these properties, make sure you are realistic about what you expect and your time line in closing.
Below is more details on each type of sale.
A Pre foreclosure, or short sale, is when the seller cannot make enough money on their home to pay the balance owed to the 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 had offers made to banks that have taken anywhere from a week or 4 months! Just to get a response. A lot of the prospective buyers lose interest or simply need to move before the process can complete. 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” 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 any bank properties, it all depends on who the bank is. If they are local, you might have a smoother transaction since things are being done on a much smaller scale. If it is large bank, like Bank of America, expect a long turn around and usually a little bit of ridiculousness.
HUD 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 properties are available online through the MLS system. Most sites you tend to 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 sites.