As your real agent prepares a listing of properties to visit and asks if you’re willing to consider buying a distress property, please say “yes!” You may uncover a gem you otherwise would have skipped past.

What’s defined as a distressed property?

A distressed property indicates the homeowner is unable to keep up with the mortgage payments and/or tax bills. The property could be under foreclosure or is being sold by the owner. Most commonly a distressed property falls into one of these three categories and is often being sold under fair market value:

1. Foreclosed Home: If the homeowner can no longer make the mortgage payments the lender seizes the property. The lender requires the former owner to vacate the home and offers the property for sale. Frequently, the home is listed as discounted price.
2. Short-Sales: This is defined as selling the property for less than is owed on the mortgage. The seller is “short” the cash needed to fully repay the mortgage. The bank agrees to accept this lesser amount of funds to recoup a portion of the mortgage owed to them.
3. Real estate owned property (REO): This is a property which has reverted back to the mortgage lender after a home fails to sell in a foreclosure auction. The bank handles any necessary eviction, pays off any tax liens, and may do repairs to the property.

Finding Your Housing Gem

It’s essential to work with a real estate agent experienced in handling distressed properties. No every home for sale will be a great deal. Your trusted agent can guide you towards the gems and away from the properties which won’t meet your needs or future expectations.

• Ask for a comparative market analysis. This report reviews comparable homes with similar characteristics to determine if you’re getting a good deal.
• Consider any needed repairs. Before making an offer calculate these expenses so you have a full picture of the investment for this home. Consider everything from the roof to repainting rooms or repairing something from the home inspector’s report.
• Confirm the taxes are current. If you purchase a home with unpaid taxes, you may be required to get these current. This also applies to a home in an HOA (homeowner’s association) if payments are behind. You want to avoid a hefty payment of any type.

Knowing the Facts About Distressed Properties

It’s smart to weigh any risks.

• Always works with a professional real agent who has your best interests, every step of the way. Never try to buy a distressed property without working with a REALTOR®.
• Banks or mortgage lenders need to approve your offer. To let the banks know you’re a serious buyer, go ahead with getting a mortgage pre-approval. This one action moves you ahead in the bank’s eyes plus saves time for everyone. Should a home be too distressed and have a lot of needed repairs it may not qualify for financing.
• Come prepared to compete with investors, house flippers, and larger property management companies. Having your financing in order positions you to be viewed as a serious buyer.
• Remember these homes as sold “as-is.” Typically, you will not be offered additional discounts to compensate for any needed repairs.
• Location, location, location. Carefully look at the neighborhood. If there is a high number of distressed homes going into foreclosure the neighborhood could be on a decline and not be a desirable, thriving place for you and your family. You want to avoid placing yourself in a situation as the previous homeowner.

Buying a home is a big step. Don’t hesitate to call on me. I’m happy to share my knowledge and expertise to help you find a great deal, in a promising neighborhood, that you’ll be proud to call “home.” Schedule an appointment today.

Since 2004 Sara Lyn Nguyen continues to bring a wealth of knowledge and expertise about buying and selling real estate around the Houston area to those she serves. Sara is a multi-year award winning REALTOR® and relocation specialist where her clients trust her to have up-to-date information on the real estate market. She has been one of Gary Greene’s Multi-Million Dollar Top Producers every year and was the #1 Top Producing agent in 2019 citywide. Sara is an American Dream TV Power Player who shares Houston real estate news with television viewers. When it’s time to buy, sell, invest, or relocate speak with a trusted professional knowledgeable in the homes and neighborhoods of Fort Bend/Sugar Land and the surrounding region.