What Is Distressed Real Estate?
Distressed real estate refers to homes whose current owners cannot maintain them. These properties are often neglected and in poor condition or risk falling into foreclosure due to defaulted mortgage payments and/or unpaid taxes. What is common among all distressed real estate properties is a low price tag. If you are looking for deals that are below market value and don’t mind handling some repairs, then distressed real estate investing may be your answer. It is usually attractive to real estate investors because of the potential profit margin.
Perhaps you are a beginner real estate investor or a professional who wants to try out a different real estate investing strategy by buying distressed property. Regardless, it is likely that you are wondering how to find distressed properties. First, you should realize that distressed properties for sale arise from many different circumstances and may not be necessarily referred to as “distressed real estate property.” Your best bet for finding distressed real estate is to look for motivated sellers who have properties they can’t handle or don’t want.
It is also important to note that before using these methods to find distressed properties, you need to have already selected a specific neighborhood where you want to purchase a property. With a good neighborhood in mind, you can now go ahead and find a distressed property. There are numerous ways to find distressed real estate property. In this blog, we’ll go through 7 of the most common.
Ways to Find Distressed Real Estate Property
1. Properties Whose Owners Are in Delinquent Status
One common way to find distressed real estate property is by searching for properties whose owners are delinquent. Owners of this type of distressed real estate are usually highly motivated. Delinquencies can be for either mortgage payments (pre-foreclosures) or taxes. A property with unpaid taxes can be seized and the owners evicted. The municipality can then decide to auction it off. You can get a list of tax-delinquent properties in your local tax assessor’s office or website.
Homeowners with unpaid mortgages on the verge of foreclosure are also usually highly motivated to quickly sell the real estate property so as to preserve their credit. You can find these properties in the Legal Paper for your county. You can also find listings of properties with delinquent mortgage payments on websites like Mashvisor that offer short sale listings.
2. Properties That Are Legally Obligated to Be Sold
Distressed real estate properties can also be in the form of properties that legally must be sold due to divorce settlements or bankruptcy. Owners going through such situations are likely to be motivated to sell their property. They will be looking to quickly liquidate their assets since they may not have time to traditionally list and sell them. To find these distressed properties, check for your county legal notices for properties being auctioned for divorce or bankruptcy. Another option is to network with local divorce and bankruptcy attorneys. When you build good relationships with them, they can contact you when they encounter such a seller.
3. REO/Bank-Owned Homes
REO properties or bank-owned homes are distressed properties that have already been foreclosed upon and repossessed by the bank. The bank that financed the mortgage now becomes the owner and the property often just sits vacant while incurring maintenance costs. They are usually cheap real estate because the bank is just interested in quickly selling them to recover the balance owed to them on the property. Banks often list these properties on the MSL or even on their website. You can also find REO properties in the US housing market on Mashvisor.
Visit the Mashvisor Property Marketplace now to find bank owned homes, foreclosures, short sale, and auction properties.
4. Properties with Elderly Owners
Elderly owners who can no longer maintain their homes often look to relocate to smaller homes that are easier to maintain. They usually don’t need the properties and can sell them at discounted prices. This aging population is usually open to direct marketing campaigns. You can buy lists of these distressed real estate properties based on demographics from a direct mailing company.
5. Properties in Probate
When a homeowner dies without assigning their properties via a will, the property goes into probate. If there is no spouse and the heirs are not local, the property may remain vacant. Probate real estate is sold through a probate court by an executor. You can find such distressed real estate properties at the county registrar or by networking with probate attorneys.
6. HUD or Government-Owned Properties
When a property originally financed by an FHA-insured mortgage is foreclosed upon, it will be acquired and sold by HUD (US Department of Housing and Urban Development). You can find these properties on the HUD website.
Learn More: Investing in HUD Homes: The Basics
7. Out-of-State Owners
These are homeowners who have relocated to another town due to a job or other responsibilities and, instead of selling or renting it out, they have left the property vacant. Usually, absentee owners hire professional property management companies to take care of the properties for them. However, that does not always work out. Some owners who live so far away may struggle to take care of the investment property. Some may not want to deal with tenant issues. Since they are often paying upkeep and mortgages for more than one property, the owners can be motivated to quickly get rid of the investment property. You can find out-of-town owners by purchasing a mailing list from online companies.
The Bottom Line
Whether for wholesaling, flipping or rental income, distressed real estate properties can offer lucrative real estate investment opportunities. This makes buying distressed real estate an attractive venture for many investors. However, finding distressed properties for sale is no easy feat. That’s why learning how to find distressed properties is crucial. By combining a number of creative strategies for targeting these properties, you can do it. There are a number of ways to find distressed real estate for sale, but the above 7 are among the best.
To effectively use these methods, you should network with real estate professionals like mortgage lenders, real estate agents, and brokers. Also, be sure to use Mashvisor when shopping for distressed real estate for sale. Mashvisor offers lists of REO properties, foreclosures, short sale, and auction properties in the US housing market.