If you need to sell a distressed property, you’re not alone. Distressed property sales remain a stable real estate category for individual homeowners and professional brokers alike.
However, taking the leap from searching for “distressed properties near me” on Google and undertaking the successful purchase and renovation of your distressed property are two very different things. At Stress Free Homebuyer, we’ve purchased more than 200 distressed properties in the Long Island area, and we’re sharing a list of common mistakes to avoid when selling a distressed property – to ensure that you find the right buyer and maximize your exit.
Who Buys Distressed Properties?
A distressed property for sale provides a unique opportunity for the buyer to get your home under market value. That’s because a distressed property usually has physical damage or financial constraints (like a pre-foreclosure or foreclosure scenario). A home with extensive damage or financial restrictions requires a real estate investor or business with the funds and know-how to purchase the house in its existing condition and prepare it for a traditional sale or renter.
What is the definition of a distressed property?
The definition of a distressed property is one that has physical damage or where the owner is facing financial hardship.
Physical damage could result from a fire or flood, delayed maintenance or vacancy, vandalism, and more. Financial hardship often occurs when the owner experiences a job loss or extended illness. It could also be a recently inherited property from a relative who lived in another city or state, making it difficult to maintain or manage from afar.
Regardless of what led to financial hardship or physical disrepair, if the owner is facing pre-foreclosure or foreclosure, or the property has extensive damage, it likely falls in the distressed property category.
So Why Distressed Properties?
If you have a distressed property for sale, you may feel like you have an asset that’s quickly losing value or that no one will want. But the opposite is often true. An experienced investor understands the value of a distressed property and sees the opportunity in something that others may not.
For buyers searching for “distressed properties near me,” the appeal is the potential for higher returns. Traditional buyers who require a mortgage won’t be able to purchase a distressed property, as it comes with more risk than most lenders will allow.
But for cash buyers like Stress Free Homebuyer, the risk of repairs or complicated financial situations isn’t a deal breaker. In fact, we have purchased more than 200 distressed properties and have a process to ensure a fair offer, quick exit for our sellers, and the opportunity to professionally restore these houses and resell them for our team.
How to Sell A Distressed Property Strategically
If you’re selling a distressed property, it’s essential to be strategic. Don’t accept any offer that comes your way because not all cash buyers are alike. Choosing an amateur investor over a seasoned buyer could work against you – from a lower offer price to a painful process. When it comes to an asset like a house (yes, even a distressed one), be sure to research who you work with.
We’ll walk you through some common mistakes when selling a distressed property – and how to avoid them.
1 – Don’t Underestimate Your Distressed Home’s Value
If you’ve been living in or managing a distressed property for any length of time, you may be ready to hand it to the first person who offers you money. We get it – our clients have navigated fire-damaged homes, foreclosures, mold, floods, and more. It’s stressful, and it may be tempting to sell for less than your home is actually worth.
But we’re here to tell you that waiting for a fair offer won’t take longer than selling to a low bidder if you work with a reputable cash buyer in your area. In fact, a professional, experienced cash buyer can see the value in a distressed sale property, particularly if they’re local and know the ins and outs of desirable neighborhoods, communities, and regional real estate trends.
2 – Don’t Make Costly Repairs
If you plan to go through a traditional real estate sale, getting the home in tip-top condition may help you maximize any offers. But repairs may not be necessary if you’re working with a cash buyer who will bring in their team to renovate. Save yourself the cost of repairs and meet with a potential real estate investor (or two) first. You don’t want to worry about painting or patching only to later find out the investor you chose plans to totally remodel.
3 – Don’t Choose an Inexperienced Buyer
We’ve touched on this above, but it’s worth reiterating. An experienced and professional cash buyer can provide the best offer for your distressed sale property. That’s because they understand the potential value and can adequately assess the costs of repair.
Another great benefit of working with a buyer like Stress Free Homebuyer is the trusted team of contractors and professionals, which keeps renovation costs as low as possible. Lastly, a reputable company won’t be as likely to pull out of a sale process if surprises pop up (in fact, we know to expect them).
So, how do you know if a cash buyer is reputable? We recommend talking to their team, looking at their information online, reading through reviews, and verifying that they’re a local and experienced company in your area. Positive testimonials and before and after success stories are a must!
4 – Understand any Legal Responsibilities
One important first step of a distressed property sale is to explore all the potential legal and financial challenges, such as liens or title issues. Do you have the right to sell the property alone, or are other parties involved? Is the home in pre-foreclosure or foreclosure? These questions and more will help you navigate what may need to be done before starting or completing a sale.
An experienced buyer can help you understand common legal considerations that come with a distressed sale property. Still, it’s ultimately your responsibility to ensure you understand and follow through with any obligations. If you’re working with an experienced cash buyer like Stress Free Homebuyer, they will likely have recommendations for attorneys who specialize in distressed property sales and can assist you.
At Stress Free Homebuyer, we understand that listing a distressed property for sale can be overwhelming. You don’t want to choose the wrong buyer or get a lowball offer you feel you must take. Follow our guide to avoid common mistakes when selling a distressed property, or reach out to our experienced team for more information on a successful exit from your home.
Frequently Asked Questions
Below are some commonly asked questions when navigating a distressed property sale. Don’t see what you need? Contact the Stress Free Homebuyer team today!
What is the definition of a distressed property?
A distressed property has significant damage (such as a storm, flood, fire, vacancy, vandalism, etc.). It can also be a property in pre-foreclosure or foreclosure.
Many of our clients may have experienced a financial hardship (like the loss of a job or prolonged illness) that led to payments or property repairs falling behind. We also see many clients who inherit property after the death of a relative. This scenario can be especially challenging when the family member lives out of state from the property and can prompt the need to sell quickly.
What are common mistakes when selling a distressed property?
Common mistakes when selling a distressed property include undervaluing it because of damage or financial hardship, making costly repairs that may not be necessary (especially if you’re working with an as-is cash buyer), choosing the wrong buyer, or not understanding and following through with your legal obligations. You can read our full blog above for a detailed explanation of these common mistakes we see when trying to sell a distressed property.
How do I choose a cash buyer for my distressed sale property?
Take the time to find an experienced and reputable real estate investor for your distressed property sale. We recommend talking to a potential buyer’s team and assessing the company’s online presence, including their website, reviews, success stories, and location.
You want a professional who understands your local area and market and has the experience to back up their offer. These credentials can help you get a fair offer and have a successful sale process!
