Looking for a great deal on a new home? Consider shopping distressed properties. If you’re not familiar with that term, a distressed property is a property under a foreclosure order. In most cases, the mortgagee of the property advertises it for sale well below its market value. Distressed properties can be a great way to enter the homeowner game, provided you know the tricks of getting in. Read on for tips on making good buys out of distressed properties.
Tip 1: Begin your search on the Internet
Start your hunt for distressed properties by logging onto the Internet. By doing a short search, you’ll find many sites that allow you to quickly locate distressed properties in your area.
Be sure to look for date stamps on any information you uncover. The Internet is a great place to find the latest information on distressed properties, but you may also end up viewing outdated information on properties no longer for sale.
One of the best ways to get access to recent listings is to use a realtor with a login on MLS. MLS is the acronym used by the Multiple Listing Service. It’s made up of a suite of different real estate services. The most well-known service it provides is a thorough listing of homes for sale along with details such as square footage, number of bedrooms and bathrooms.
Use your Internet research to get an idea of what kinds of properties are available and the kinds of prices being asked for distressed properties.
Tip 2: Get prequalified
Once you have a general idea of the price of the properties you’re going to consider buying, get prequalified. This means you need to go to a bank or mortgage lender and have them run the numbers that will determine how much you can afford.
To get prequalified, you usually have to produce proof of your annual income, assets, and debts. You may also be asked to provide documentation showing how long you’ve been in your current occupation.
If you’re planning to buy a distressed property with another person, you’ll want that person to get prequalified with you. Your combine income will then determine what size of a mortgage you can get.
The main reason to get prequalified before you actually begin visiting distressed properties is so you don’t waste time – neither yours nor the sellers. If you can’t afford to buy the property in the first place, there’s no sense in visiting it or talking about potential deals.
Tip 3: Be ready to move quickly (or slowly)
Because purchasing a home is such a huge undertaking, the process can be drawn out over many months. In contrast, the purchase of a foreclosed property can happen in just a few short weeks – or it can take many, many months.
Either way, you need to be ready to make the decision when the time comes for you to act. Be ready to move quickly if your situation calls for that, or be ready to exercise your patience.
Tip 4: Prepare for an overhaul
In a lot of cases, distressed properties have not been kept in the best condition. They’re usually sold on an “as is” basis, without the touch-up efforts most homes on the market will show.
In some cases, disgruntled owners of distressed properties will vandalize the houses or strip them bare. In extreme cases, previous owners will even bore holes into the plumbing lines or air ducts to cause hassle-laden leaks.
Chances are good that any distressed property you buy will need a little TLC. Be prepared to overhaul the house to get it to living conditions and don’t be shocked if the process takes a while.
Sometimes it’s even a good idea to sign on to a mortgage above the asking price of the foreclosed property you’re buying so you’ll have enough cash left to pay for repairs and home improvements.
Tip 5: Work with professionals
The art of buying a distressed property is a precarious one. Contracts leading up to the sale can be filled with loopholes and head games. You absolutely want to work with a skilled buyer’s agent and a reputable lender in order to close the deal.
Beyond that, you’ll want to choose well-established work crews known for quality work when it comes to home improvement. Make sure you can trust any contractor you hire to give you honest estimates on what it’ll take to make your distressed property livable.
After that, it’s just a matter of waiting and overseeing the process until the day you move in and call the place “home sweet home.”
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