While today’s inventory of distressed properties isn’t as robust as it once was, with markets recovering and home prices steadily increasing, these types of properties are still very desirable to many buyers. In areas like Denver where prices are high and options are limited, distressed housing can be a great alternative.
Distressed properties typically fall into three categories:
- Foreclosed homes – most often occur when a homeowner is no longer able to make the mortgage payments and the lender seizes the property. These homes are sometimes sold at auction to the highest bidder.
- Real estate owned (REO) properties – an REO is one that has reverted to the mortgage lender after the home fails to sell in a foreclosure auction. Once the bank owns the property, it typically handles any necessary eviction, pays off tax liens and possibly even does some repairs.
- Short-sales – When a homeowner sells his or her property for less than the amount owed on their mortgage, it is known as a “short-sale.”
If you’re considering purchasing a distressed property, keep the following tips in mind:
- Banks need to approve your offer, and they typically only consider serious offers. Getting mortgage preapproval before you make an offer on a distressed house is crucial.
- It’s likely you’ll be competing with investors, house flippers and larger property management companies. These folks often pay in cash. If you’re obtaining mortgage financing, you’ll have to prove you’re a solid buyer if you want the best shot at getting the bank to consider your bid.
- Distressed property sales can have a number of unique problems and pitfalls. These homes are typically sold “as-is”, which means what you see is what you get.
- When picking a real estate agent, find one who has experience handling distressed home sales. The right real estate professional can help guide you through the unique process of purchasing a distressed property.
- Be careful about looking for a distressed property that’s located in a distressed neighborhood. If every house on the block is going into foreclosure or if every condo in the high-rise is vacant, you should probably look elsewhere.
If you’re considering a distressed property, contact Metrowest. We specialize in these types of sales and would be happy to teach you more about the process and show you what Denver has to offer!