Distressed Property – Finding the Best One
5 minute read
February 22, 2021


Distressed property

You have to consider a distressed property if you search for a great return on investment in real estate deals. If you are a newcomer or an expert real estate investor, buying distressed properties is a perfect investing approach. You will get a reasonable amount of profit from this kind of investment. But if you are unfamiliar with the distressed property phenomenon. Don’t worry! This article will help you to get familiar with distressed property and how to find the best one.

What is a distressed property?

Any property that has been under foreclosure or property sold by a lender due to a certain reason is a distressed property. The distressed property is usually affected by an owner who cannot pay off the mortgage, bills, or taxes. It is also normal to sell any of the distressed property below the market value.

Key information

Late payments of the mortgage do not reclaim all the distressed properties. Lenders, financial institutions, and credit unions occasionally seek to preserve their investment, to resell or reclaim the property. Lenders take these actions because of other asset claims. This can also happen if they detect some mortgage fraud.

Distressed property examples

There are two red flags mentioned here to look for a good deal:

  • Compromise on the location.

Not all, but in low-income areas of the city or state, there are several distressed properties. In those areas, buying is minimal. The question arises that how much you will invest in upgrading the area without making your home valuable.

  • Not sure about making repairs.

It is common that distressed properties are less than outstanding and will require some immediate and fast repairs if you have not thought about improvements or do them at an affordable price. Then it will be a red flag.

How to Find Distressed Property

It is not difficult to find distressed homes for sale. How to find distressed properties and where to find them? The answer to the questions are as follows:

  • Auctions

On the Auction websites, you find one of the best locations for distressed property listings. To search for distressed property, you review auction listings in the area of interest. Then your deal on those revenue properties that are present on the website. You can also search local newspapers for details of possible foreclosures, in addition to online listings.

  • Checking the Multiple listing services

Each property investor must know how to identify distressed properties on the MLS (Multiple Listing Service). The MLS is approved only for persons with a proper real estate license. You may also work with a real estate manager if you do not have a license. The sign of distressed property is generally a listing categorized as real estate owned (REO) or short-sale property.

You can also search for more than 90 days for listing properties. That period typically indicates the motivation and encouragement level of the seller. If the property is present in the market for a long time, the person selling distressed property is likely to get anxious. It gives the property purchaser an advantage in the course of negotiations.

  • Drive for Money

Finding a distressed property is an outstanding approach across the area that you choose. Five of the most important signs to watch out for are.

  • The peeling or fading external paint
  • Broken shutters or windows
  • The weedy courtyard
  • Unuse journals
  • The notices paste on the doors

Make sure to note down the address when you find such assets. In this way, you can easily start your search for more details. Do not hesitate to speak to people who have important knowledge about the properties that are neglected. Let’s take an example; neighbors always have useful information sources about both the property and the owner. A realtor will also be happy to provide useful knowledge. This is because vacancies are the major responsibility for them. Many clients do not want to live in distressed homes. You can also find out who holds property with a database. Finally, search for mailing services in the target area and ask them for more information.

  • Attorneys

Homes are also distressed with legal issues. Therefore, attorneys are a perfect source of knowledge for distressed properties. Any of the attorneys with whom you speak are all mentioned below:

  • Foreclosure attorneys

Such attorneys deal for banks who are involved in households foreclosing directly. Officials of the bank generally do not settle without contacting the attorney first. Always make contact with a few attorneys. After that, you will be the first one to hear about the opportunities for investing in real estate.

  • Probate attorneys

Those who inherit land are automatically responsible for paying off mortgages, major maintenance costs, and taxes. The only choice available is to sell the property to cover expenses if the heirs have no financial capacity. Networking in your target field or area through probate attorneys will help you. This provides you with an insight into customers who wish to sell their legacy.

  • Family law attorneys

Conflicts over land sometimes follow a divorce. It means the divorced spouses will also experience a compulsory divorce protocol. When you contact a divorce attorney in your focus area, you are aware of assets. Awareness is the need at the initial stages of the foreclosure proceedings. You can also look for posts of divorce filings in your local newspaper. Always remember that there can be potentially more issues during a divorce than just the family home. The pair may also have other properties, including heritage or holiday homes. They want to sell these properties quickly.


While distressed selling provides various advantages, but some part of difficulties and issues still exists. Although these houses are sold as-is, you will have to pay a high price for particular renovations and repairs. Most mortgage lenders do not even agree to provide distressed loans for the purchase. This happens in the case of major renovations because they are the major requirement. Thus, before investing in a distressed property, you need to be patient.

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