You may have heard conflicting stories about distressed housing, but in reality, these types of transactions aren’t exceptionally different than a traditional home sale. Simply put, a distressed property is any property whose owner – for a variety of reasons – is in default on the mortgage. A few types of homes fall under the distressed housing umbrella:
Short sales
In a short sale, the final price of the home is less than the total amount owed to the lender, but the transaction closes before the lender forecloses. Here you negotiate the home sale price with the owner and the lender.
Foreclosures
Foreclosures are homes that have been repossessed by the lender for lack of payment. Foreclosed properties are either sold at auction or put on the open market as REO (real estate owned) listings.
These types of properties can be great deals for homebuyers – especially those who are trying to break into a hot market like Denver. Here we’ll outline a few tips to help break down the buying process and hopefully allow you to find the perfect distressed property for your needs.
- DO Get pre-approved for a mortgage
The banks who need to approve your offer need to know you’re serious about buying, so make sure you’re preapproved for a mortgage before you make an offer on a distressed house. - DO hire someone experienced in buying distressed properties.
- DON’T look for distressed properties in declining neighborhoods. If there are several foreclosures in the same area, it may be harder to build equity back and recoup costs.
- DON’T skip a professional inspection on any property you’d consider putting an offer on.
- DO be ready to make repairs. Distressed property can be a great deal, but they often need work. The scope can range from cosmetic repairs to extensive remodeling – be sure to build those numbers into your overall budget.
Ready to start checking out distressed properties in Denver? Give Metrowest a shout. Our experienced pros would love to help you start the process.