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Sometimes, things do not go well in the world of real estate. Here is what you need to know about distressed sales and bank foreclosures, and how you can turn the situation to your advantage.

What is a distressed sale?

A distressed sale takes place when an asset (property, stocks, etc.) needs to be converted to cash and is sold, often at a loss. Usually, the funds are used to cover for outstanding debt and other emergencies like medical expenses. For real estate matters, the funds from distressed sales are often used to pay for their loan. A foreclosure is an example of a distressed sale, were the homeowner forfeits his or her property for failing to pay the mortgage.

Pros and cons of distressed properties

Distressed properties are often sold for much less compared to other types of properties on the market, making it a hot commodity for individuals who are looking to invest in real estate or actually buy a home. This is due to the fact that the bank or the residents want to make a quick sale.

A common downside of distressed properties, however, is that they often do not come in good shape. Do not expect updated fixtures and a new coat of paint throughout the property. Since the owners are selling it below market value and want to make a quick sale out of it, they will hardly have any time to prepare the property and make it look like new.

Financing the repairs of a distressed property can make a dent in your savings, but if you are financially prepared and determined to see this through, the end product will be worth it. On the bright side, not all foreclosed properties are decrepit – some are actually in pretty good shape.

Tips to remember when buying distressed property


  • Work with a Realtor and a professional home inspector. If you do not have prior experience in investing in distressed properties, working with professionals will give you a good sense of what to do and what not to do. They can also give you references in case the property needs a makeover.


  • Be financially prepared.It is common for buyers to purchase distressed properties with cash, so make sure you are prepared to face the competition. If you do not have the necessary cash, work with a lender and get a strong loan pre-approval. If you want to stand out from the rest, increase your earnest money deposit or down payment.


  • Patience is key.Investing in distressed property will take more paperwork than usual, so take a deep breath and be patient.


  • Hire knowledgeable professionals.It is good to work with experienced Realtors – just make sure they are also knowledgeable in distressed sales. A real estate expert in such types of sales will help you recognize the value of a property and will not let you invest in a home that is not worth the trouble.


Are you interested in investing in distressed properties and bank foreclosures? Get in touch with me today at 760 622 5087 or click here for more information.