Is a distressed property the right deal for you?

For many buyers, the term "foreclosure" brings up images of run-down homes with no heat and rotting wood. While this is still the case for some homes, it’s no longer the standard. In fact, buyers are snatching up distressed deals in decent condition for great prices.

By definition, a distressed property is one that was purchased with a loan and the homeowner is no longer able to make their mortgage payment resulting in foreclosure – or if they’re lucky, a short sale – meaning they owe more on the home than it’s currently worth. With a 20% increase in foreclosures from 2009, distressed properties still remain a large portion of home sales and are going to continue well into 2010 as homeowners continue to feel the effects of an economy on the mend.

If you’re in the market for a home and are prepared for a unique transaction, a distressed property could be a great option. As always, due diligence is key. Here are a few things to remember before you decide to buy distressed:

1. Get pre-approved. Whether you’re buying a distressed property or a traditional home, knowing how much house you can afford is the first step. In the case of a distressed property there could be multiple offers on the table. Remember, banks want to get these properties off their hands quickly and typically don’t take buyer contingencies – such as needing to sell your home before you buy – into account. The buyer who can act fast will usually get the home.

2. Stay focused. If you’re prepared to buy a distressed property it's critical you understand that the process of purchasing the home could be very fast or very slow. There are many aspects of the transaction that are in the hands of banks and lenders. There is always a lot of paperwork, and there aren’t always definitive answers. While a professional will do everything they can to simplify the process, know that it can get complicated.

3. Be decisive. If you are specifically in the market for a great deal then distressed properties are your best bet. However, if the right property hits the market at the right price it's critical to act fast and decisively. Buyers who gamble by waiting for another price drop or take too long to make a decision could miss a good buy.

4. Be prepared. For anything. Not all distressed properties are falling apart. But some are. And as a serious buyer, you must be prepared to see the worst.

5. Due Diligence. It doesn’t hurt to say it again, and again: protect your investment. Have an inspector look at the property before you buy so that you know how much money you may have to put into fixing the home. Remember, because banks are already losing money, they don’t include allowances for costly repairs when selling the home. Also have an appraiser determine the home's worth in case you decide to sell the home down the road.

Your best ally when purchasing a distressed property is an expert. Always have a professional REALTOR® by your side to help you make informed decisions.

If you are in need of real estate services I would be honored if you gave me the opportunity to serve you.

Todd C. Menard, GRI, CNE, BROKER, REALTOR
todd@toddcmenard.com
602-410-2686 Cell

Keller Williams Integrity First
Serving The Greater Phoenix Metropolitan Market and Surrounding Suburbs
http://www.toddcmenard.com/