Properties are normally repossessed when the owner defaults on their mortgage payment or is compelled by a court order to vacate. Distressed property can thus be defined as that which is under a foreclosure order, or put up for sale by its mortgage. The property is usually sold in order to pay off what the previous owner owed. For the lenders to recoup their investment quickly, repossessed property will often be sold at prices below the current market value.
Should You Invest in Distressed Property?
In the past few years, a significant number of homeowners have had their property getting repossessed as they struggle to keep up with mortgage payments. Meanwhile, many investors and homebuyers remain oblivious of the dip in property prices they hoped for. Though repossessions are unfortunate, there’s no need to worry about taking advantage of the situation. By paying for the house, one actually helps in repaying most of the debt.
Because of the need to raise funds quickly and the fact that distressed houses aren’t usually in mint condition, they’re likely to be priced lower than similar properties. Besides, offers below the set price could be accepted if the homes initially fail to attract interest. Theoretically, buying such homes could be a lucrative property investment strategy. Houses can be bought at a bargain price, renovated then sold to the open market at a decent markup or even leased out.
Given the current economic climate, it’s possible to find many such deals through auctions and estate agent. If one is investing in large numbers, special arrangements could even be made through asset management firms. It also helps significantly if one is a cash buyer or at least has financing already in place because sellers usually want proof of this before offers are even considered.
Finding Repossessed Properties
Though purchasing distressed property could enable one acquire a home for less than the normal market value, the process isn’t quite simple. This especially applies for first-time buyers, who may find themselves against landlords and developers with huge financial firepower. Such people always maintain relationships with estate agents, meaning they often hear about such deals first.
As such, one needs to establish a good working relationship with several estate agents in the area they want to invest. Visiting their office during the week would give one a better chance of meeting the management. It’s also worthwhile considering agents with ties to particular financial institutions as they are often the main outlet for the said lenders’ homes.
When going through local papers, remember to check the ads at the back of the property section. This information could also be found online, though most sites don’t disclosed whether the property is repossessed. Most such portals are usually cheap, with vague descriptions and no photos. Property auctions are other places where one could check for deals, though these are often patronized by real pros.
When buying distressed property, one needs to check the essentials as is the case when buying via estate agents. These include titles, existing infrastructure and transport in the area, whether previous owners have vacated and what caused the repossession in the first place. One should also keep in mind that the properties often need renovation.