Do’s and Don’ts when Buying a Distressed Property

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.

Ken Blevins

About Ken Blevins

Ken Blevins, CEO of Metrowest Real Estate Services, is a veteran in mortgage and default servicing with more than 24 years of experience in collections, foreclosure/bankruptcy, loss mitigation and real estate disposition (REO). Blevins was an original co-founder of Metrowest in 2003, a Real Estate Brokerage and Services Company focused on the resale, recovery and liquidation of distressed real estate in Denver, Colorado and surrounding metros. Blevins assumed the role of CEO in January 2014 and provides strategic direction and has management accountability for the day-to-day operations. Under his direction, Blevins drives all default management operations to maximize asset value recovery and reduce loss severity through a strategy focused on customer service and state of the art technology. Blevins has 18 years of direct operational experience in all facets of REO Asset Management having managed large national REO Disposition contracts for Fannie Mae, Freddie Mac, Wells Fargo, JP Morgan Chase, CitiFinancial, GMAC Mortgage and other various financial institutions. Blevins specialties include REO asset management, real estate investment, bulk REO acquisitions and distressed asset recovery and liquidation, and he has directed the resolution and liquidation of over ten billion in institutionally-owned residential real estate.

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