What is a Distressed Property - No doubt you’ve heard a lot about distressed properties here in Rio Rancho (and frankly most of the country). But what exactly is a distressed property? By definition a property could be either physically distressed or financially distressed. Many are both physically and financially distressed.
A physically distressed property is simply a property that is in poor physical condition. This can be from neglect, often referred to as deferred maintenance, or from damage. The damage could be from just about any cause including fire, water, storm, theft or vandalism, freeze damage. Physically distressed property can be very difficult or impossible to finance by conventional means (but there are alternative methods).
A financially distressed property is one that is in poor financial condition. This can also be for a variety of reasons but most commonly it is a properly that the mortgagee has been foreclosed, is in or about to go into foreclosure, or one which the owner can no longer maintain the mortgage payments and/or needs to sell but owes more than they could sell the property for in the current market, commonly referred to as a Short Sale Property.

Buying Distressed Property - Buying a distressed property can be an excellent opportunity to find a property that is discounted compared to similar non-distressed properties. It can also be more challenging as these properties are usually sold in “as is” condition and often require some repairs. They are usually a more complicated transaction and will require more patience on your part. The process varies greatly between buying a property that is bank owned (REO) or privately owned (Short Sale).
In an REO sale your offer will be reviewed by an asset manager either working for the bank that owns the property or for a third party asset management company. In some cases the asset manager has authority to negotiate and accept your offer and in some cases they must go back to a client for approval which can delay a response by several days. In the case of a short sale you will negotiate with the home owner but once they accept your offer it still gas to be approved by the lender, a process that can take anywhere from several days to several weeks. We are starting to see more short sale properties being marketed as a “pre-approved” short sale. This generally just means the home owner has been approved to do a short sale. Your offer still must be reviewed.

Selling Distressed Property - If you can no longer make your mortgage payments or if you need to move but owe more than you can currently sell your home for foreclosure is not your only option. Each situation is different but you do have options. You may be able to make a bad situation into a better situation.
If you have any questions or would like to learn more about buying or selling distressed property please feel free to contact me. I have been selling bank properties for over eleven years and I am a Certified Distressed Property Expert (CDPE).